Discussion paper

DP10273 Dynamic Spatial Competition Between Multi-Store Firms

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.

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Citation

Aguirregabiria, V (2014), ‘DP10273 Dynamic Spatial Competition Between Multi-Store Firms‘, CEPR Discussion Paper No. 10273. CEPR Press, Paris & London. https://cepr.org/publications/dp10273