Discussion Paper Details

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Title: Empirical Games of Market Entry and Spatial Competition in Retail Industries

Author(s): Victor Aguirregabiria and Junichi Suzuki

Publication Date: February 2015

Keyword(s): econometrics of discrete choice games, market entry and exit, retail industries and spatial competition

Programme Area(s): Industrial Organization

Abstract: We survey the recent empirical literature on structural models of market entry and spatial competition in oligopoly retail industries. We start with the description of a framework that encompasses various models that have been estimated in empirical applications. We use this framework to discuss important specification assumptions in this literature: firm heterogeneity; specification of price competition; structure of spatial competition; firms' information; dynamics; multi-store firms; and structure of unobservables. We next describe different types of datasets that have been used in empirical applications. Finally, we discuss econometric issues that researchers should deal with in the estimation of these models, including multiple equilibria and unobserved market heterogeneity. We comment on the advantages and limitations of alternative estimation methods, and how these methods relate to identification restrictions. We conclude with some issues and topics for future research.

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Bibliographic Reference

Aguirregabiria, V and Suzuki, J. 2015. 'Empirical Games of Market Entry and Spatial Competition in Retail Industries'. London, Centre for Economic Policy Research.