Estimating Network Economies in Retail Chains: A Revealed Preference Approach

Ellickson, Paul B.; Houghton, Stephanie; Timmins, Christopher

doi:10.3386/w15832

Cited by 43 publications

(49 citation statements)

References 31 publications

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“…There is a growing body of literature that analyzes retail chain expansion where exit is extremely rare (e.g., Toivanen and Waterson, 2011;Beresteanu et al, 2010;Holmes, 2011;Basker et al, 2012). There are studies that investigate store location in retail markets that mostly build on static models (e.g., Seim, 2006;Jia, 2008;Nishida, 2010;Holmes, 2011;Orth, 2011;Ellickson et al, 2013). In Appendix D, we explicitly show how to account for location differentiation in our dynamic framework (Davis, 2006;Seim, 2006).…”

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confidence: 99%

Entry Regulations, Product Differentiation and Determinants of Market Structure

Maican

Orth

2013

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We use a dynamic oligopoly model of entry and exit to evaluate how entry regulations affect profitability and market structure in retail. The model incorporates demand and store-level heterogeneity. Based on unique data for all retail food stores in Sweden, we find that the average entry costs for small and large stores are 10 and 18 percent lower, respectively, in markets with liberal compared with restrictive regulations. Counterfactual simulations show that lower entry costs in restrictive markets result in higher entry rates and allow us to quantify the consequences of regulations in light of trade-offs between small and large stores. Terms of use: Documents in EconStor may

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confidence: 99%

Entry Regulations, Product Differentiation and Determinants of Market Structure

Maican

Orth

2013

SSRN Journal

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“…Also related are a recent strand of papers on network economies faced by chain stores when setting their store location profiles, including Jia (2008), Holmes (2011), Ellickson, Houghton, and Timmins (2013), and Nishida (2012. These papers study models that allow for the measurement of payoff externalities from store location choices across different markets, which, like most of the aforementioned literature, our model does not incorporate.…”

Section: Related Literaturementioning

confidence: 99%

“…Each set Y j is discrete but M j can be arbitrarily large, possibly infinite. Y ≡ (Y 1 , ..., Y J ) denotes the action profile of all J players, and for any player j ∈ J we adopt the common convention that Y −j denotes the vector of 2 Of the papers in this literature, only Ellickson, Houghton, and Timmins (2013) and Nishida (2012) also allow an ordered but non-binary within-market action space. Nishida (2012), in similar manner to Jia (2008), employs an equilibrium selection rule to circumvent the identification problems posed by multiple equilibria.…”

Section: The Modelmentioning

confidence: 99%

“…We explicitly allow for multiple equilibria, without imposing restrictions on equilibrium selection. Ellickson, Houghton, and Timmins (2013) allow for multiple equilibria and partial identification, but employ a very different payoff structure. In particular, they model unobserved heterogeneity in market-level payoffs through a single scalar unobservable shared by all firms.…”

Section: The Modelmentioning

confidence: 99%

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Inference in Ordered Response Games with Complete Information

Rosen¹,

Aradillas-López²

2014

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We study econometric models of complete information games with ordered action spaces, such as the number of store fronts operated in a market by a firm, or the daily number of flights on a city-pair offered by an airline. The model generalizes single agent models such as ordered probit and logit to a simultaneous model of ordered response. We characterize identified sets for model parameters under mild shape restrictions on agents' payoff functions. We then propose a novel inference method for a parametric version of our model based on a test statistic that embeds conditional moment inequalities implied by equilibrium behavior. Using maximal inequalities for U-processes, we show that an asymptotically valid confidence set is attained by employing an easy to compute fixed critical value, namely the appropriate quantile of a chi-square random variable. We apply our method to study capacity decisions measured as the number of stores operated by Lowe's and Home Depot in geographic markets. We demonstrate how our confidence sets for model parameters can be used to perform inference on other quantities of economic interest, such as the probability that any given outcome is an equilibrium and the propensity with which any particular outcome is selected when it is one of multiple equilibria.

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“…This type of economies of scope is called economies of density. The recent empirical literature on retail chains has emphasized the importance of these economies of density, i.e., Holmes (2011), Jia (2008, Ellickson, Houghton, and Timmins (2013), and Nishida (forthcoming). For instance, the transportation cost associated with the distribution of products from wholesalers to retail stores can be smaller if stores are close to each other.…”

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confidence: 99%

Empirical games of market entry and spatial competition in retail industries

Aguirregabiria¹,

Suzuki²

2016

Handbook on the Economics of Retailing and Distribution

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We survey the recent empirical literature on structural models of market entry and spatial competition in oligopoly retail industries. We start with the description of a framework that encompasses various models that have been estimated in empirical applications. We use this framework to discuss important specification assumptions in this literature: firm heterogeneity; specification of price competition; structure of spatial competition; firms' information; dynamics; multi-store firms; and structure of unobservables. We next describe different types of datasets that have been used in empirical applications. Finally, we discuss econometric issues that researchers should deal with in the estimation of these models, including multiple equilibria and unobserved market heterogeneity. We comment on the advantages and limitations of alternative estimation methods, and how these methods relate to identification restrictions. We conclude with some issues and topics for future research.

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Estimating Network Economies in Retail Chains: A Revealed Preference Approach

Cited by 43 publications

References 31 publications

Entry Regulations, Product Differentiation and Determinants of Market Structure

Entry Regulations, Product Differentiation and Determinants of Market Structure

Inference in Ordered Response Games with Complete Information

Empirical games of market entry and spatial competition in retail industries

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