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A Search‐Theoretic Interpretation of Multi‐Outlet Retailers *
Author(s) -
PRENTICE DAVID,
SIBLY HUGH
Publication year - 1996
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.1996.tb00970.x
Subject(s) - market power , profit (economics) , microeconomics , industrial organization , competition (biology) , market share , business , interpretation (philosophy) , economics , marketing , computer science , monopoly , ecology , programming language , biology
Why do retailing firms operate several chains of stores, each of which is in apparent competition with the others? This paper demonstrates that by increasing the number of, apparently independent, stores it controls, a firm can discourage consumer search and increase its market power. It is also shown that an increased share of outlets controlled by a multi‐outlet firm allows both single‐outlet firms and the multi‐outlet firm to raise price and thereby increase profit. These results also imply that once the traditional one‐firm, one‐outlet assumption is relaxed, sequential search models may become unstable.