Quality Differentiation and Spatial Clustering among Restaurants

30 Pages Posted: 10 Mar 2020 Last revised: 20 Aug 2020

See all articles by Pascal Mossay

Pascal Mossay

affiliation not provided to SSRN

Jong Kook Shin

Korea University - Sejong Campus

Grega Smrkolj

Newcastle University Business School

Date Written: August 19, 2020

Abstract

To explore the relationship between spatial location and quality differentiation, we build a dataset of over 30,000 restaurants rated by TripAdvisor, across large UK cities. Whereas top-rated restaurants tend to locate close to other top restaurants, bottom-rated restaurants tend to locate away from each other and closer to top ones. Our theoretical model can explain the main features of observed spatial patterns. We find that an increase in the population density in the city center reduces the spatial dispersion of both top and bottom restaurants but this reduction is larger in magnitude for top restaurants. Also, a larger quality difference between top and bottom restaurants increases both the absolute and relative dispersion of top restaurants.

Keywords: Spatial competition, Quality differentiation, Hotelling model, Restaurant industry

JEL Classification: L13, L83, R12, R32

Suggested Citation

Mossay, Pascal and Shin, Jong Kook and Smrkolj, Grega, Quality Differentiation and Spatial Clustering among Restaurants (August 19, 2020). Available at SSRN: https://ssrn.com/abstract=3540202 or http://dx.doi.org/10.2139/ssrn.3540202

Pascal Mossay

affiliation not provided to SSRN

Jong Kook Shin

Korea University - Sejong Campus ( email )

Sejong
Korea, Republic of (South Korea)

Grega Smrkolj (Contact Author)

Newcastle University Business School ( email )

5 Barrack Road
Newcastle upon Tyne, NE1 4SE
United Kingdom

HOME PAGE: http://www.ncl.ac.uk/business-school/staff/profile/gregasmrkolj.html

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