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Store characteristics in retail oligopoly
Author(s) -
Smith Howard
Publication year - 2006
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/j.1756-2171.2006.tb00023.x
Subject(s) - counterfactual thinking , incentive , business , unit (ring theory) , value (mathematics) , oligopoly , microeconomics , industrial organization , rank (graph theory) , automotive industry , consumer expenditure , marketing , economics , cournot competition , public economics , computer science , philosophy , mathematics education , mathematics , aggregate expenditure , epistemology , combinatorics , machine learning , engineering , aerospace engineering
I use a consumer choice model for the British supermarket industry to compare the incentives of firms, selecting store characteristics, with the interests of consumers. I perform a series of counterfactual changes to store size and location and rank the alternatives by gains per unit of fixed cost. Jointly, firms gain most from large stores, which increase total consumer expenditure. Individually, however, firm incentives are strongly influenced by business‐stealing effects, resulting in a close agreement with consumers, who value middle‐sized stores and distance‐reducing relocations. These individual firm incentives provide little consumer‐protection justification for recent size and location regulations .