Intra- and Inter-Channel Competition in Local-Service Sectors

40 Pages Posted: 26 Aug 2006

See all articles by Kathleen Cleeren

Kathleen Cleeren

Catholic University of Leuven (KUL) - Department of Applied Economics

M. G. Dekimpe

Catholic University of Leuven (KUL) - Department of Applied Economics; Erasmus Research Institute of Management (ERIM)

Frank Verboven

Catholic University of Leuven (KUL) - Department of Applied Economics; Centre for Economic Policy Research (CEPR)

Date Written: March 30, 2005

Abstract

Although economically very important, local-service sectors have received little attention in the extensive literature on competitive interactions. Detailed data gathering in these sectors is hard, not only because of the multitude of local players, but also because key service dimensions are hard to quantify. Using empirical entry models, we show how to infer information on these sectors' degree of intra- and inter-channel competition from the observed entry decisions in different local markets. The approach also controls for relevant socio-demographic characteristics of the trading area that may affect performance. We apply the proposed empirical entry model to the video-rental market. Additional entries of video stores are found to significantly increase the level of intra-channel competition. Unlike the predictions of many normative economic models, we find this increase to be larger when the entry occurs in a duopoly than in a monopoly, a pattern consistent with recent experimental research on collusive behavior in oligopolies. We also find evidence of inter-channel cannibalization from the upstream channel (movie theatres), but not from the downstream channel (premium cable). Finally, various socio-demographic characteristics of the trading zone, such as income and household size, are found to also have a significant impact on store performance.

Keywords: channel competition, empirical entry models, movie industry

Keywords: Channel competition, empirical entry models, movie industry

JEL Classification: M, C44, D4, M31

Suggested Citation

Cleeren, Kathleen and Dekimpe, Marnik and Verboven, Frank, Intra- and Inter-Channel Competition in Local-Service Sectors (March 30, 2005). ERIM Report Series Reference No. ERS-2005-018-MKT, Available at SSRN: https://ssrn.com/abstract=797932

Kathleen Cleeren

Catholic University of Leuven (KUL) - Department of Applied Economics ( email )

Leuven, B-3000
Belgium

Marnik Dekimpe (Contact Author)

Catholic University of Leuven (KUL) - Department of Applied Economics ( email )

Leuven, B-3000
Belgium
+32 16 326 957 (Phone)
+32 16 326 732 (Fax)

HOME PAGE: http://www.econ.kuleuven.ac.be/tew/academic/market/members/MarnikDekimpe.htm

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 1715/9576 (Phone)
+31 10 408 9011 (Fax)

HOME PAGE: http://web.eur.nl/fbk/dep/dep3/about/members/people/mdekimpe

Frank Verboven

Catholic University of Leuven (KUL) - Department of Applied Economics ( email )

Leuven, B-3000
Belgium
+32 1 632 6944 (Phone)
+32 1 632 6732 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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