Dynamic Entry & Spatial Competition: An Application to Dollar Store Expansion

We incorporate spatial differentiation into a dynamic oligopoly game played by multi-store and single-store retailers. We propose a tractable estimation strategy based on the ECCP estimator of Kalouptsidi et al. (2020), adapted to games. The model is used to study dollar store chains' expansion in the US since 2008 and its impact on spatial market structure. We show that accounting for rival stores' spatial reallocation is crucial to quantify the net impact of dollar stores. Grocery stores differentiate from dollar stores by strategically relocating or entering new locations with higher income and lower population density.

Keywords: retail competition, spatial differentiation, dollar store, dynamic games

JEL Classification: L13, D43, L51

Suggested Citation: Suggested Citation

Caoui, El Hadi and Caoui, El Hadi and Hollenbeck, Brett and Osborne, Matthew, Dynamic Entry & Spatial Competition: An Application to Dollar Store Expansion (June 21, 2024). Available at SSRN: https://ssrn.com/abstract=4872647 or http://dx.doi.org/10.2139/ssrn.4872647