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Do we go shopping downtown or in the ‘burbs’? Why not both?

  • USHCHEV, Philip

    ()

    (NRU-Higher School of Economics, Russia)

  • SLOEV, Igor

    ()

    (NRU-Higher School of Economics, Russia)

  • THISSE, Jacques-François

    ()

    (Université catholique de Louvain, CORE, Belgium)

  • ,

We combine spatial and monopolistic competition to study market interactions between downtown retailers and an outlying shopping mall. Consumers shop at either marketplace or at both, and buy each variety in volume. The market solution stems from the interplay between the market expansion effect generated by consumers seeking more opportunities, and the competition effect. Firms’ profits increase (decrease) with the entry of local competitors when the former (latter) dominates. Downtown retailers swiftly vanish when the mall is large. A predatory but efficient mall need not be regulated, whereas the regulator must restrict the size of a mall accommodating downtown retailers.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2013057.

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Date of creation: 25 Nov 2013
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Handle: RePEc:cor:louvco:2013057
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  1. Alex Anas & Richard Arnott & Kenneth A. Small, 1998. "Urban Spatial Structure," Journal of Economic Literature, American Economic Association, vol. 36(3), pages 1426-1464, September.
  2. Mitchel Y. Abolafia (ed.), 2005. "Markets," Books, Edward Elgar, number 2788, December.
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  7. G. Chemla, 1999. "Downstream competition, foreclosure, and vertical integration," THEMA Working Papers 99-18, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  8. Armstrong, Mark & Vickers, John, 2006. "Competitive nonlinear pricing and bundling," MPRA Paper 70, University Library of Munich, Germany.
  9. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
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  12. Howard Smith & Donald Hay, 2005. "Streets, Malls, and Supermarkets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 29-59, 03.
  13. Chemla, Gilles, 2003. "Downstream Competition, Foreclosure, and Vertical Integration," Economics Papers from University Paris Dauphine 123456789/6313, Paris Dauphine University.
  14. Chou, Chien-fu & Shy, Oz, 1990. "Network effects without network externalities," International Journal of Industrial Organization, Elsevier, vol. 8(2), pages 259-270, June.
  15. Konrad Stahl, 1982. "Location and Spatial Pricing Theory with Nonconvex Transportation Cost Schedules," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 575-582, Autumn.
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