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A Search-Theoretic Interpretation of Multi-outlet Retailers

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  • Prentice, David
  • Sibly, Hugh

Abstract

Why do retailing firms operate several chains of stores, each of which is in apparent competition with the others? This paper demonstrates that by increasing the number of, apparently independent, stores it controls, a firm can discourage consumer search and increase its market power. It is also shown that an increased share of outlets controlled by a multi-outlet firm allows both single-outlet firms and the multi-outlet firm to raise price and thereby increase profit. These results also imply that once the traditional one-firm, one-outlet assumption is relaxed, sequential search models may become unstable. Copyright 1996 by The Economic Society of Australia.

Suggested Citation

  • Prentice, David & Sibly, Hugh, 1996. "A Search-Theoretic Interpretation of Multi-outlet Retailers," The Economic Record, The Economic Society of Australia, vol. 72(219), pages 359-369, December.
    • Handle: RePEc:bla:ecorec:v:72:y:1996:i:219:p:359-69
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    References listed on IDEAS

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    1. Rothschild, Michael, 1974. "Searching for the Lowest Price When the Distribution of Prices Is Unknown," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 689-711, July/Aug..
    2. Steven Salop, 1977. "The Noisy Monopolist: Imperfect Information, Price Dispersion and Price Discrimination," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 393-406.
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    6. Dudey, Marc, 1990. "Competition by Choice: The Effect of Consumer Search on Firm Location Decisions," American Economic Review, American Economic Association, vol. 80(5), pages 1092-1104, December.
    7. McMillan, John & Rothschild, Michael, 1994. "Search," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 2, chapter 27, pages 905-927, Elsevier.
    8. Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(2), pages 185-199.
    9. Marc Dudey, 1988. "Competition by choice," International Finance Discussion Papers 327, Board of Governors of the Federal Reserve System (U.S.).
    10. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-329, March-Apr.
    11. Stiglitz, Joseph E, 1987. "Competition and the Number of Firms in a Market: Are Duopolies More Competitive than Atomistic Markets?," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 1041-1061, October.
    12. Stahl, Dale O, II, 1989. "Oligopolistic Pricing with Sequential Consumer Search," American Economic Review, American Economic Association, vol. 79(4), pages 700-712, September.
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    Cited by:

    1. Prentice, David & Sibly, Hugh, 1998. "The Non-robustness of the Nash-Stackelberg-Hybrid Equilibrium," Australian Economic Papers, Wiley Blackwell, vol. 37(4), pages 383-393, December.
    2. Judy Taylor & Gary Magee, 2017. "In the Aftermath: Consumer Choice and the Deregulation of Australian Retail Banking, 1988–1993," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 57(2), pages 134-157, July.

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