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University of Florida
Levin College of Law

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Friday, August 2, 2013

Strategic Clustering and Competition by Alcohol Retailers: An Emperical Anlysis of Entry and Location Decisions

Posted by D. Daniel Sokol

Yi Deng (Department of Economics, University of South Florida) and Gabriel Picone (Department of Economics, University of South Florida) discuss Strategic Clustering and Competition by Alcohol Retailers: An Emperical Anlysis of Entry and Location Decisions.

ABSTRACT: We develop and estimate a spatial game-theoretic model of entry and location choices to examine firms’ strategic clustering decisions. The model identifies two contradictory effects that determine firms’ geographical location choices: a competition effect and a clustering effect. We also separate firms’ strategic clustering incentives from the observed clustering behavior due to exogenous factors such as population and topographic desirability or constraints. In particular, we examine two closely related industries that share similar location limitations but have different strategic incentives to cluster, jointly estimate the Bayesian Nash equilibrium of a two-industry entry and location game, and quantify the strategic clustering incentives.

http://lawprofessors.typepad.com/antitrustprof_blog/2013/08/strategic-clustering-and-competition-by-alcohol-retailers-an-emperical-anlysis-of-entry-and-location.html

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