Measuring competition in spatial retail

Paul B. Ellickson, Paul L.E. Grieco, Oleksii Khvastunov

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

We propose and estimate a spatially aggregated discrete-choice model with overlapping consumer choice sets and demographic-driven heterogeneity that varies by chain. Our approach avoids the need to define markets ex ante and captures rich substitution patterns, even in the absence of price data. An application to the US grocery industry illustrates the importance of location, format, and the spatial distribution of consumers in shaping the competitive environment. Contrary to conventional wisdom, we find substantial cross-format competition between supercenters, clubs, and traditional grocers. Finally, we evaluate two representative mergers between supermarket chains to demonstrate how our estimates inform antitrust policy.

Original languageEnglish (US)
Pages (from-to)189-232
Number of pages44
JournalRAND Journal of Economics
Volume51
Issue number1
DOIs
StatePublished - Mar 1 2020

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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