Discussion Paper Details

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Title: Entry Regulations and Product Variety in Retail

Author(s): Florin Maican and Matilda Orth

Publication Date: April 2021

Keyword(s): Competition, Entry regulation, product variety, productivity and Retail markets

Programme Area(s): Industrial Organization

Abstract: This paper estimates a dynamic model of store adjustments in product variety that considers multiproduct service technology to evaluate the impact of entry regulations on variety and long-run profits in Swedish retail. Using rich data on stores and product categories, we find that more liberal entry regulation increases productivity and decreases the adjustment costs of variety. Counterfactual simulations of modest liberalizations of entry incentivize incumbents to offer more product categories to consumers while increasing efficiency and long-run profits. Regional differences are reduced as consumers and incumbents obtain more benefits in markets with restrictive regulation. Generous liberalizations of entry induce net exit of product categories and harm incumbents in markets with limited demand.

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Bibliographic Reference

Maican, F and Orth, M. 2021. 'Entry Regulations and Product Variety in Retail'. London, Centre for Economic Policy Research.