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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 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.

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

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Date of creation: 14 Jun 2012
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Handle: RePEc:tor:tecipa:tecipa-457
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