Thursday, February 26, 2015

Dynamic Spatial Competition Between Multi-Store Firms

Victor Aguirregabiria and Gustavo Vicentini explore Dynamic Spatial Competition Between Multi-Store Firms.

ABSTRACT: We propose a dynamic model of an oligopoly industry characterized by spatial competition between multi-store retailers. Firms compete in prices and decide where to open or close stores depending on demand conditions and the number of competitors at different locations, and on location-specific private-information shocks. We develop an algorithm to approximate a Markov Perfect Equilibrium in our model, and propose a procedure for the estimation of the parameters of the model using panel data on number of stores, prices, and quantities at multiple geographic locations within a city. We also present numerical examples to illustrate the model and algorithm.

https://lawprofessors.typepad.com/antitrustprof_blog/2015/02/dynamic-spatial-competition-between-multi-store-firms-.html

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