Entry Regulations, Product Differentiation and Determinants of Market Structure

88 Pages Posted: 12 Oct 2013 Last revised: 12 Dec 2014

Florin Maican

University of Gothenburg, Department of Economics; Research Institute of Industrial Economics (IFN)

Matilda Orth

Research Institute of Industrial Economics (IFN), Stockholm

Date Written: July 23, 2014

Abstract

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

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

Florin Maican

University of Gothenburg, Department of Economics ( email )

Box 640
Goteborg
Sweden

HOME PAGE: http://sites.google.com/site/maicanfg/

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Matilda Orth (Contact Author)

Research Institute of Industrial Economics (IFN), Stockholm ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

HOME PAGE: http://www.ifn.se/matildao

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