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

  • Sloev, Igor
  • Thisse, Jacques-François
  • Ushchev, Philip

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 ccompetition 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 C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9604.

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Date of creation: Aug 2013
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Handle: RePEc:cpr:ceprdp:9604
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