IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

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 retailers. 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 develop an algorithm to approximate a Markov Perfect Equilibrium in our model, and propose a procedure for the estimation of the parameters of the model using panel data on number of stores, prices, and quantities at multiple geographic locations within a city. We also present numerical examples to illustrate the model and algorithm.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://www.economics.utoronto.ca/public/workingPapers/tecipa-457.pdf
File Function: Main Text
Download Restriction: no

Paper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-457.

as
in new window

Length: Unknown pages
Date of creation: 14 Jun 2012
Date of revision:
Handle: RePEc:tor:tecipa:tecipa-457
Contact details of provider: Postal: 150 St. George Street, Toronto, Ontario
Phone: (416) 978-5283

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Ariel Pakes & Paul McGuire, 1994. "Computing Markov-Perfect Nash Equilibria: Numerical Implications of a Dynamic Differentiated Product Model," RAND Journal of Economics, The RAND Corporation, vol. 25(4), pages 555-589, Winter.
  2. Victor Aguirregabiria, 2009. "A Method for Implementing Counterfactual Experiments in Models with Multiple Equilibria," Working Papers tecipa-381, University of Toronto, Department of Economics.
  3. Aviv Nevo, 1998. "Measuring Market Power in the Ready-to-Eat Cereal Industry," NBER Working Papers 6387, National Bureau of Economic Research, Inc.
  4. Patrick Bajari & C. Lanier Benkard & Jonathan Levin, 2004. "Estimating Dynamic Models of Imperfect Competition," NBER Working Papers 10450, National Bureau of Economic Research, Inc.
  5. John Rust, 1997. "Using Randomization to Break the Curse of Dimensionality," Econometrica, Econometric Society, vol. 65(3), pages 487-516, May.
  6. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
  7. Ting Zhu & Vishal Singh, 2009. "Spatial competition with endogenous location choices: An application to discount retailing," Quantitative Marketing and Economics, Springer, vol. 7(1), pages 1-35, March.
  8. Victor Aguirregabiria & Pedro Mira, 2002. "Swapping the Nested Fixed Point Algorithm: A Class of Estimators for Discrete Markov Decision Models," Econometrica, Econometric Society, vol. 70(4), pages 1519-1543, July.
  9. Paul B. Ellickson & Stephanie Houghton & Christopher Timmins, 2013. "Estimating network economies in retail chains: a revealed preference approach," RAND Journal of Economics, RAND Corporation, vol. 44(2), pages 169-193, 06.
  10. Doraszelski, Ulrich & Escobar, Juan, 2008. "A Theory of Regular Markov Perfect Equilibria in Dynamic Stochastic Games: Genericity, Stability, and Purification," CEPR Discussion Papers 6805, C.E.P.R. Discussion Papers.
  11. Che-Lin Su & Kenneth L. Judd, 2008. "Constrainted Optimization Approaches to Estimation of Structural Models," Discussion Papers 1460, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  12. Douglas S. West, 1981. "Testing for Market Preemption Using Sequential Location Data," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 129-143, Spring.
  13. repec:rje:randje:v:37:y:2006:i:4:p:964-982 is not listed on IDEAS
  14. Stephen Ryan, 2005. "The Costs of Environmental Regulation in a Concentrated Industry," Working Papers 0510, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
  15. Aguirregabiria, Victor & Vicentini, Gustavo, 2007. "Software for the Computation of Markov-Perfect Equilibria in a Dynamic Game of Store Location by Multi-Store Firms," MPRA Paper 17035, University Library of Munich, Germany.
  16. Andrew Sweeting, 2013. "Dynamic Product Positioning in Differentiated Product Markets: The Effect of Fees for Musical Performance Rights on the Commercial Radio Industry," Econometrica, Econometric Society, vol. 81(5), pages 1763-1803, 09.
  17. Joris Pinkse & Margaret E. Slade & Craig Brett, 2002. "Spatial Price Competition: A Semiparametric Approach," Econometrica, Econometric Society, vol. 70(3), pages 1111-1153, May.
  18. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, June.
  19. Kenneth L. Judd, 1985. "Credible Spatial Preemption," RAND Journal of Economics, The RAND Corporation, vol. 16(2), pages 153-166, Summer.
  20. Ulrich Doraszelski & Mark Satterthwaite, 2003. "Foundations of Markov-Perfect Industry Dynamics. Existence, Purification, and Multiplicity," Discussion Papers 1383, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  21. Hay, D A, 1976. "Sequential Entry and Entry-Deterring Strategies in Spatial Competition," Oxford Economic Papers, Oxford University Press, vol. 28(2), pages 240-57, July.
  22. Victor Ginsburgh & André De Palma & Yorgo Papageorgiou & Jacques Thisse, 1985. "The principle of Minimum Differentiation Holds under Sufficient Heterogeneity," ULB Institutional Repository 2013/151087, ULB -- Universite Libre de Bruxelles.
  23. Ronald S. Jarmin & Shawn D. Klimek & Javier Miranda, 2009. "The Role of Retail Chains: National, Regional and Industry Results," NBER Chapters, in: Producer Dynamics: New Evidence from Micro Data, pages 237-262 National Bureau of Economic Research, Inc.
  24. Fernando Bernstein & A. Gürhan Kök, 2009. "Dynamic Cost Reduction Through Process Improvement in Assembly Networks," Management Science, INFORMS, vol. 55(4), pages 552-567, April.
  25. Katja Seim, 2006. "An empirical model of firm entry with endogenous product‐type choices," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 619-640, 09.
  26. Curtat, Laurent O., 1996. "Markov Equilibria of Stochastic Games with Complementarities," Games and Economic Behavior, Elsevier, vol. 17(2), pages 177-199, December.
  27. Ulrich Doraszelski & Mark Satterthwaite, 2010. "Computable Markov-perfect industry dynamics," RAND Journal of Economics, RAND Corporation, vol. 41(2), pages 215-243.
  28. Victor Aguirregabiria & Pedro Mira, 2007. "Sequential Estimation of Dynamic Discrete Games," Econometrica, Econometric Society, vol. 75(1), pages 1-53, 01.
  29. Thomas J. Holmes, 2008. "The Diffusion of Wal-Mart and Economies of Density," NBER Working Papers 13783, National Bureau of Economic Research, Inc.
  30. Echenique, Federico, 2007. "Finding all equilibria in games of strategic complements," Journal of Economic Theory, Elsevier, vol. 135(1), pages 514-532, July.
  31. B. Curtis Eaton, 1972. "Spatial Competition Revisited," Canadian Journal of Economics, Canadian Economics Association, vol. 5(2), pages 268-78, May.
  32. Aguirregabiria, Victor, 1999. "The Dynamics of Markups and Inventories in Retailing Firms," Review of Economic Studies, Wiley Blackwell, vol. 66(2), pages 275-308, April.
  33. Ho, Katherine & Ishii, Joy, 2011. "Location and competition in retail banking," International Journal of Industrial Organization, Elsevier, vol. 29(5), pages 537-546, September.
  34. Andrew Eckert & Douglas West, 2008. "Radius Restrictions on Retail Chains and the Similarity of Neighboring Shopping Centers," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 15(3), pages 281-300.
  35. Ariel Pakes & Michael Ostrovsky & Steve Berry, 2004. "Simple Estimators for the Parameters of Discrete Dynamic Games (with Entry/Exit Examples)," Harvard Institute of Economic Research Working Papers 2036, Harvard - Institute of Economic Research.
  36. Bonanno, Giacomo, 1987. "Location Choice, Product Proliferation and Entry Deterrence," Review of Economic Studies, Wiley Blackwell, vol. 54(1), pages 37-45, January.
  37. Richard Schmalensee, 1978. "Entry Deterrence in the Ready-to-Eat Breakfast Cereal Industry," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 305-327, Autumn.
  38. Eaton, B Curtis & Lipsey, Richard G, 1975. "The Principle of Minimum Differentiation Reconsidered: Some New Developments in the Theory of Spatial Competition," Review of Economic Studies, Wiley Blackwell, vol. 42(1), pages 27-49, January.
  39. Joris Pinkse & Margaret E. Slade, 2010. "The Future Of Spatial Econometrics," Journal of Regional Science, Wiley Blackwell, vol. 50(1), pages 103-117.
  40. Tabuchi, Takatoshi, 1994. "Two-stage two-dimensional spatial competition between two firms," Regional Science and Urban Economics, Elsevier, vol. 24(2), pages 207-227, April.
  41. Margaret E. SLADE, 2005. "The Role of Economic Space in Decision Making," Annales d'Economie et de Statistique, ENSAE, issue 77, pages 1-20.
  42. Paul B. Ellickson & Stephanie Houghton & Christopher Timmins, 2010. "Estimating Network Economies in Retail Chains: A Revealed Preference Approach," NBER Working Papers 15832, National Bureau of Economic Research, Inc.
  43. W.J. Lane, 1980. "Product Differentiation in a Market with Endogenous Sequential Entry," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 237-260, Spring.
  44. Panle Jia, 2008. "What Happens When Wal-Mart Comes to Town: An Empirical Analysis of the Discount Retailing Industry," Econometrica, Econometric Society, vol. 76(6), pages 1263-1316, November.
  45. C. Lanier Benkard, 2004. "A Dynamic Analysis of the Market for Wide-Bodied Commercial Aircraft," Review of Economic Studies, Wiley Blackwell, vol. 71, pages 581-611, 07.
  46. Douglas S. West, 1981. "Tests of Two Locational Implications of a Theory of Market Pre-Emption," Canadian Journal of Economics, Canadian Economics Association, vol. 14(2), pages 313-26, May.
  47. Luc Anselin, 2010. "Thirty years of spatial econometrics," Papers in Regional Science, Wiley Blackwell, vol. 89(1), pages 3-25, 03.
  48. Slade, Margaret E, 1992. "Vancouver's Gasoline-Price Wars: An Empirical Exercise in Uncovering Supergame Strategies," Review of Economic Studies, Wiley Blackwell, vol. 59(2), pages 257-76, April.
  49. Peter Davis, 2006. "Spatial competition in retail markets: movie theaters," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 964-982, December.
  50. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
  51. Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, vol. 55(5), pages 999-1033, September.
  52. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 53-82, January.
  53. Neven, Damien J., 1987. "Endogenous sequential entry in a spatial model," International Journal of Industrial Organization, Elsevier, vol. 5(4), pages 419-434.
  54. Edward C. Prescott & Michael Visscher, 1977. "Sequential Location among Firms with Foresight," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 378-393, Autumn.
  55. Paul Ellickson & Beresteanu Arie, 2005. "The Dynamics of Retail Oligopolies," 2005 Meeting Papers 829, Society for Economic Dynamics.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:tor:tecipa:tecipa-457. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (RePEc Maintainer)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.