Entry Regulations, Product Differentiation and Determinants of Market Structure
University of Gothenburg, Department of Economics; Research Institute of Industrial Economics (IFN)
Research Institute of Industrial Economics (IFN), Stockholm
July 23, 2014
IFN Working Paper No. 984
We use a dynamic oligopoly model of entry and exit with store-type differentiation to evaluate how entry regulations affect profitability and market structure in retail. Based on unique data for all retail food stores in Sweden, we find different cost structures and asymmetric competition across store types. Two additional small stores correspond to the same decrease in a small store's long-run profits as one large store. A number of counterfactual experiments that target the entry of different store types and markets with various degrees of regulation provide rich information for policymakers concerning the effect of regulations on market structure dynamics.
Number of Pages in PDF File: 88
Keywords: Imperfect competition, Product differentiation, Retail markets, Entry, Exit, Sunk costs
JEL Classification: L11, L13, L81
Date posted: October 12, 2013 ; Last revised: December 12, 2014
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