Optimal Competition and Allocation of Space in Shopping Centers
This article explains why a profit-maximizing developer may include multiple, competing outlets in a shopping center. While competing outlets presumably dissipate potential profits, thereby lowering aggregate rents that the developer can extract, the presence of shopping externalities causes the developer to be interested not just in individual store profits, but also in the traffic they generate throughout the center. And since competition among identical stores increases traffic, it can create an offsetting advantage that favors multiple outlets. The article provides a theoretical analysis of this problem and illustrates its implications for tenant mix by applying the theory to the problem of filling a vacant store. The paper concludes by explicitly relating the analysis to Brueckner's (1993) model of the optimal allocation of space in shopping centers.
Volume (Year): 16 (1998)
Issue (Month): 1 ()
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- Miceli, Thomas J. & Sirmans, C. F., 1995. "Contracting with spatial externalities and agency problems The case of retail leases," Regional Science and Urban Economics, Elsevier, vol. 25(3), pages 355-372, June.
- Mark J. Eppli & James D. Shilling, 1995. "Large-Scale Shopping Center Development Opportunities," Land Economics, University of Wisconsin Press, vol. 71(1), pages 35-41.
- Benjamin, John D. & Boyle, Glenn W. & Sirmans, C. F., 1992. "Price discrimination in shopping center leases," Journal of Urban Economics, Elsevier, vol. 32(3), pages 299-317, November.
- Brueckner, Jan K, 1993. "Inter-store Externalities and Space Allocation in Shopping Centers," The Journal of Real Estate Finance and Economics, Springer, vol. 7(1), pages 5-16, July.
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