IDEAS home Printed from https://ideas.repec.org/a/bla/jindec/v70y2022i3p565-590.html
   My bibliography  Save this article

When do Co‐located Firms Selling Identical Products Thrive?

Author

Listed:
  • Dan Bernhardt
  • Evangelos Constantinou
  • Mehdi Shadmehr

Abstract

When consumers only see prices once they visit stores, and some consumers have time to comparison shop, co‐location commits stores to compete and lower prices, which draws consumers away from isolated stores. Profits of co‐located firms are a single‐peaked function of the number of shoppers—co‐located firms thrive when there are some shoppers, but not too many. When consumers know in advance whether they have time to shop, effects are enhanced: co‐located stores may draw enough shoppers to drive the expected price paid by a non‐shopper below that paid when consumers do not know if they will have time to shop.

Suggested Citation

  • Dan Bernhardt & Evangelos Constantinou & Mehdi Shadmehr, 2022. "When do Co‐located Firms Selling Identical Products Thrive?," Journal of Industrial Economics, Wiley Blackwell, vol. 70(3), pages 565-590, September.
    • Handle: RePEc:bla:jindec:v:70:y:2022:i:3:p:565-590
    DOI: 10.1111/joie.12297
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/joie.12297
    Download Restriction: no
    File URL: https://libkey.io/10.1111/joie.12297?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Stahl, Dale O., 1996. "Oligopolistic pricing with heterogeneous consumer search," International Journal of Industrial Organization, Elsevier, vol. 14(2), pages 243-268.
    2. Jeffrey H. Fischer & Joseph E. Harrington Jr., 1996. "Product Variety and Firm Agglomeration," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 281-309, Summer.
    3. Mark Armstrong, 2017. "Ordered Consumer Search," Journal of the European Economic Association, European Economic Association, vol. 15(5), pages 989-1024.
    4. Parakhonyak, Alexei & Titova, Maria, 2018. "Shopping malls, platforms and consumer search," International Journal of Industrial Organization, Elsevier, vol. 58(C), pages 183-213.
    5. Baye, Michael R. & Kovenock, Dan & de Vries, Casper G., 1992. "It takes two to tango: Equilibria in a model of sales," Games and Economic Behavior, Elsevier, vol. 4(4), pages 493-510, October.
    6. Constantinou, Evangelos & Bernhardt, Dan, 2018. "The price-matching dilemma," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 97-113.
    7. 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.
    8. Stahl, Dale O, II, 1989. "Oligopolistic Pricing with Sequential Consumer Search," American Economic Review, American Economic Association, vol. 79(4), pages 700-712, September.
    9. Glenn Ellison & Sara Fisher Ellison, 2009. "Search, Obfuscation, and Price Elasticities on the Internet," Econometrica, Econometric Society, vol. 77(2), pages 427-452, March.
    10. Shilony, Yuval, 1977. "Mixed pricing in oligopoly," Journal of Economic Theory, Elsevier, vol. 14(2), pages 373-388, April.
    11. ., 2001. "Industrial Organization Theory and Experimental Economics," Chapters, in: Market Institutions and Price Discovery, chapter 2, pages 18-60, Edward Elgar Publishing.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. David Ronayne, 2021. "Price Comparison Websites," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(3), pages 1081-1110, August.
    2. Monica Giulietti & Michael Waterson & Matthijs Wildenbeest, 2014. "Estimation of Search Frictions in the British Electricity Market," Journal of Industrial Economics, Wiley Blackwell, vol. 62(4), pages 555-590, December.
    3. Banks, Jeffrey & Moorthy, Sridhar, 1999. "A model of price promotions with consumer search," International Journal of Industrial Organization, Elsevier, vol. 17(3), pages 371-398, April.
    4. Martin Obradovits & Philipp Plaickner, 2023. "Price-Directed Search, Product Differentiation and Competition," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 63(3), pages 317-348, November.
    5. Parakhonyak, Alexei & Titova, Maria, 2018. "Shopping malls, platforms and consumer search," International Journal of Industrial Organization, Elsevier, vol. 58(C), pages 183-213.
    6. Andrew Rhodes & Jidong Zhou, 2019. "Consumer Search and Retail Market Structure," Management Science, INFORMS, vol. 67(6), pages 2607-2623, June.
    7. Michael R. Baye & John Morgan & Patrick Scholten, 2004. "Price Dispersion In The Small And In The Large: Evidence From An Internet Price Comparison Site," Journal of Industrial Economics, Wiley Blackwell, vol. 52(4), pages 463-496, December.
    8. Chioveanu, Ioana & Zhou, Jidong, 2009. "Price Competition and Consumer Confusion," MPRA Paper 17340, University Library of Munich, Germany.
    9. Michael Grubb, 2015. "Failing to Choose the Best Price: Theory, Evidence, and Policy," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(3), pages 303-340, November.
    10. Dirk Bergemann & Benjamin Brooks & Stephen Morris, 2021. "Search, Information, and Prices," Journal of Political Economy, University of Chicago Press, vol. 129(8), pages 2275-2319.
    11. Johannes Johnen & David Ronayne, 2021. "The only Dance in Town: Unique Equilibrium in a Generalized Model of Price Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 69(3), pages 595-614, September.
    12. Wilson, Chris M., 2010. "Ordered search and equilibrium obfuscation," International Journal of Industrial Organization, Elsevier, vol. 28(5), pages 496-506, September.
    13. Maarten C.W. Janssen & Jose Luis Moraga-Gonzalez, 2007. "On Mergers in Consumer Search Markets," Tinbergen Institute Discussion Papers 07-054/1, Tinbergen Institute.
    14. Anirban Sengupta & Steven Wiggins, 2006. "Airline Pricing, Price Dispersion and Ticket Characteristics On and Off the Internet," Working Papers 06-07, NET Institute, revised Oct 2006.
    15. Kathy Baylis & Jeffrey Perloff, 2002. "Price Dispersion on the Internet: Good Firms and Bad Firms," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 21(3), pages 305-324, November.
    16. Chioveanu, Ioana, 2008. "Advertising, brand loyalty and pricing," Games and Economic Behavior, Elsevier, vol. 64(1), pages 68-80, September.
    17. Ioana Chioveanu & Jidong Zhou, 2013. "Price Competition with Consumer Confusion," Management Science, INFORMS, vol. 59(11), pages 2450-2469, November.
    18. Janssen, Aljoscha & Kasinger, Johannes, 2021. "Obfuscation and rational inattention in digitalized markets," SAFE Working Paper Series 306, Leibniz Institute for Financial Research SAFE.
    19. Janssen, Aljoscha & Kasinger, Johannes, 2021. "Obfuscation and Rational Inattention in Digitalized Markets," Working Paper Series 1379, Research Institute of Industrial Economics.
    20. Michael R. Baye & J. Rupert J. Gatti & Paul Kattuman & John Morgan, 2009. "Clicks, Discontinuities, and Firm Demand Online," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(4), pages 935-975, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jindec:v:70:y:2022:i:3:p:565-590. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.