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Löschian Spatial Competition in an Emerging Retail Industry
Author(s) -
Miron John R.
Publication year - 2002
Publication title -
geographical analysis
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 65
eISSN - 1538-4632
pISSN - 0016-7363
DOI - 10.1111/j.1538-4632.2002.tb01074.x
Subject(s) - renting , competition (biology) , business , proxy (statistics) , profit (economics) , industrial organization , marketing , economic geography , economics , microeconomics , computer science , ecology , law , biology , machine learning , political science
Löschian competition is traditionally thought to lead to a spatial equilibrium in which firms enter an industry and disperse across geographic space until each firm earns insufficient excess profit to attract net new entrants. This paper assesses the appropriateness of Löschian analysis using video (movie) rental establishments in Toronto as a case example. The video rental business, as we know it today, began to take shape around 1980 and has since seen much turnover. The paper describes the changing pattern of single‐site and chain stores between 1982 and 1999. I use logistic regression to predict the survival of existing establishments. Using survivorship as a proxy for profit, the paper draws conclusions about the extent to which temporal changes in video store location correspond to the tenets of Löschian competition. The coexistence of chain and single‐site stores suggests that there are distinct market niches and that single‐site stores have used a “swarming” strategy to compete against chains. Conclusions are drawn about how the retail sector might evolve in the future because of the locational competition between chains and single‐site stores.