Empirical Entry Games with Complementarities: An Application to the Shopping Center Industry

Journal of Marketing Research, Forthcoming

72 Pages Posted: 13 Aug 2009 Last revised: 4 Apr 2012

Maria Ana Vitorino

University of Minnesota - Carlson School of Management

Date Written: August 31, 2011

Abstract

This paper proposes a strategic model of entry that allows for positive and negative spillovers among firms. The model is applied to a novel dataset containing information about the store configurations of all US regional shopping centers and is used to quantify the magnitude of inter-store spillovers. The author addresses the estimation difficulties that arise due to the presence of multiple equilibria by formulating the entry game as a Mathematical Problem with Equilibrium Constraints (MPEC). While this paper constitutes the first attempt to use this direct optimization approach to address a specific empirical problem, the method can be used in a wide range of structural estimation problems. The empirical results support the agglomeration and clustering theories that predict firms may have incentives to co-locate despite potential business stealing effects. It is shown that the firms’ negative and positive strategic effects help predict both how many firms can operate profitably in a given market and the firm-types configurations. The relative magnitude of such effects varies substantially across store-types.

Keywords: Entry, Spillovers, Shopping Centers, Incomplete information game, Direct optimization approach, MPEC

JEL Classification: C6, L0, L1, L2, L8, M3

Suggested Citation

Vitorino, Maria Ana, Empirical Entry Games with Complementarities: An Application to the Shopping Center Industry (August 31, 2011). Journal of Marketing Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1447549 or http://dx.doi.org/10.2139/ssrn.1447549

Maria Ana Vitorino (Contact Author)

University of Minnesota - Carlson School of Management ( email )

3-150 Carlson School of Management
321 - 19th Avenue South
Minneapolis, MN 55455
United States

HOME PAGE: http://www.tc.umn.edu/~vitorino/

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