Optimal Competition and Allocation of Space in Shopping Centers

Posted: 6 Dec 1998

See all articles by Thomas J. Miceli

Thomas J. Miceli

University of Connecticut - Department of Economics

C. F. Sirmans

Florida State University - Department of Risk Management, Insurance, Real Estate & Business Law

Denise Stake

Allegis Realty Investors, Inc.

Abstract

This article explains why a profit-maximizing developer may include multiple, competing outlets in a shopping center. While competing outlets presumably dissipate potential profits, thereby lowering aggregate rents that the developer can extract, the presence of shopping externalities causes the developer to be interested not just in individual store profits, but also in the traffic they generate throughout the center. And since competition among identical stores increases traffic, it can create an offsetting advantage that favors multiple outlets. The article provides a theoretical analysis of this problem and illustrates its implications for tenant mix by applying the theory to the problem of filling a vacant store. The paper concludes by explicitly relating the analysis to Brueckner's (1993) model of the optimal allocation of space in shopping centers.

JEL Classification: R33

Suggested Citation

Miceli, Thomas J. and Sirmans, C. F. and Stake, Denise, Optimal Competition and Allocation of Space in Shopping Centers. Available at SSRN: https://ssrn.com/abstract=126031

Thomas J. Miceli (Contact Author)

University of Connecticut - Department of Economics ( email )

365 Fairfield Way, U-1063
Storrs, CT 06269-1063
United States
860-486-5810 (Phone)
860-486-4463 (Fax)

C. F. Sirmans

Florida State University - Department of Risk Management, Insurance, Real Estate & Business Law ( email )

Tallahasse, FL 32306
United States
850 644-4076 (Phone)

HOME PAGE: http://www.cob.fsu.edu/rmi

Denise Stake

Allegis Realty Investors, Inc. ( email )

Hartford, CT 06103
United States

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