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Dynamic Spatial Competition Between Multi-Store Firms

  • Victor Aguirregabiria
  • Gustavo Vicentini

We propose a dynamic model of an oligopoly industry characterized by spatial competition between multi-store firms. Firms compete in prices and decide where to open or close stores depending on demand conditions and the number of competitors at different locations, and on location-specific private-information shocks. We provide an algorithm to compute Markov Perfect Equilibria (MPE) in our model. We conduct several numerical experiments to study how the propensity of multi-store retailers to spatial preemptive behavior depends on the magnitude of entry costs, exit value and transportation costs.

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Paper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-253.

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Date of creation: 29 Aug 2006
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Handle: RePEc:tor:tecipa:tecipa-253
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  19. Kenneth L. Judd, 1983. "Credible Spatial Preemption," Discussion Papers 577, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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