Competition When Consumers Value Firm Scope

45 Pages Posted: 3 Sep 2008

See all articles by Nathan Miller

Nathan Miller

Georgetown University - Robert Emmett McDonough School of Business

Date Written: August 2008

Abstract

I model multimarket competition when consumers value firm scope across markets. Such competition is surprisingly common - consumers in many industries prefer firms that operate in more geographic and/or product markets. I show that these preferences permit firms of differing scopes to coexist in equilibrium. Within markets, firms of greater scope have higher prices and market shares. I turn to the commercial banking industry for the empirical implementation. Structural estimation of the model firmly supports the assumptions on consumer preferences, and empirical predictions specific to the model hold in the data. The results suggest that theoretical model is empirically relevant.

Keywords: firm scope, consumer preferences, multimarket competition, banks

JEL Classification: G2, L1, L2

Suggested Citation

Miller, Nathan, Competition When Consumers Value Firm Scope (August 2008). Available at SSRN: https://ssrn.com/abstract=1262277 or http://dx.doi.org/10.2139/ssrn.1262277

Nathan Miller (Contact Author)

Georgetown University - Robert Emmett McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

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