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An empirical analysis of entry and location decisions by bars and liquor stores

Author

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  • Yi Deng

    (Federal Trade Commission)

  • Gabriel Picone

    (University of South Florida)

Abstract

We analyze the entry and location decisions of bars and liquor stores using a spatial game-theoretical framework. We first estimate a one-industry location game where we model bars and liquor stores separately. We then estimate a two-industry location game where we model bars and liquor stores jointly. The model allows for two contradictory effects: a competition effect and a spillover effect. Estimation results reveal a strong negative competition effect for both bars and liquor stores. However, bars appear to benefit from a substantially positive spillover effect. We also find that bars and liquor stores compete with each other. For example, an additional liquor store in a location decreases the probability of a new bar opening in that location and vice versa.

Suggested Citation

  • Yi Deng & Gabriel Picone, 2019. "An empirical analysis of entry and location decisions by bars and liquor stores," Empirical Economics, Springer, vol. 57(5), pages 1751-1782, November.
  • Handle: RePEc:spr:empeco:v:57:y:2019:i:5:d:10.1007_s00181-018-1507-7
    DOI: 10.1007/s00181-018-1507-7
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