88 Pages Posted: 12 Oct 2013 Last revised: 12 Dec 2014
Date Written: July 23, 2014
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.
Keywords: Imperfect competition, Product differentiation, Retail markets, Entry, Exit, Sunk costs
JEL Classification: L11, L13, L81
Suggested Citation: Suggested Citation
Maican, Florin and Orth, Matilda, Entry Regulations, Product Differentiation and Determinants of Market Structure (July 23, 2014). IFN Working Paper No. 984. Available at SSRN: https://ssrn.com/abstract=2339052 or http://dx.doi.org/10.2139/ssrn.2339052