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Measuring Competition in Spatial Retail

55 Pages Posted: 11 Aug 2016  

Paul B. Ellickson

University of Rochester - Simon Business School

Paul L.E. Grieco

Pennsylvania State University - Department of Economics

Oleksii Khvastunov

Pennsylvania State University

Date Written: July 30, 2016

Abstract

We propose a framework for analyzing spatial competition between retailers of different formats. Our approach yields localized measures of concentration and store-level diversion ratios that can be used to prospectively evaluate mergers in highly differentiated retail markets. Our method does not require the analyst to define markets ex ante, collect prices or construct ad hoc price indices. Using data from the supermarket industry, we evaluate two representative mergers. Contrary to conventional wisdom, we find substantial cross-format competition between supercenters, club stores, and traditional grocers. Our analysis cautions against ignoring the impact of new formats when evaluating mergers between traditional grocers.

Keywords: Grocery Retail, Store Choice, Anti-Trust Regulation, Demand Estimation

Suggested Citation

Ellickson, Paul B. and Grieco, Paul L.E. and Khvastunov, Oleksii, Measuring Competition in Spatial Retail (July 30, 2016). Simon Business School Working Paper No. FR 16-07. Available at SSRN: https://ssrn.com/abstract=2819621 or http://dx.doi.org/10.2139/ssrn.2819621

Paul B. Ellickson (Contact Author)

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

Paul L.E. Grieco

Pennsylvania State University - Department of Economics ( email )

University Park
State College, PA 16802
United States

Oleksii Khvastunov

Pennsylvania State University ( email )

University Park
State College, PA 16802
United States

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