IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/20044.html
   My bibliography  Save this paper

Isolation or joining a mall? On the location choice of competing shops

Author

Listed:
  • Non, Marielle

Abstract

I study the location choice of competing shops. A shop can either be isolated or join a mall. A fraction of consumers is uninformed about prices and incurs costs to travel between market places and to enter a shop. The equilibrium mall size is computed for several parameter values, showing that mall and isolated shops can coexist. Several effects play a role. Mall shops attract more consumers, but isolated shops set a higher maximum price. Moreover, numerical evaluations show that an increase in mall size decreases the average price level and increases the participation level of uninformed consumers.

Suggested Citation

  • Non, Marielle, 2010. "Isolation or joining a mall? On the location choice of competing shops," MPRA Paper 20044, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:20044
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/20044/1/MPRA_paper_20044.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Konrad Stahl, 1982. "Location and Spatial Pricing Theory with Nonconvex Transportation Cost Schedules," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 575-582, Autumn.
    2. Dudey, Marc, 1993. "A Note on Consumer Search, Firm Location Choice, and Welfare," Journal of Industrial Economics, Wiley Blackwell, vol. 41(3), pages 323-331, September.
    3. 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.
    4. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, vol. 91(3), pages 454-474, June.
    5. Stahl, Konrad, 1982. "Differentiated Products, Consumer Search, and Locational Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 31(1-2), pages 97-113, September.
    6. 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.
    7. Gehrig, Thomas, 1998. "Competing markets," European Economic Review, Elsevier, vol. 42(2), pages 277-310, February.
    8. Konishi, Hideo, 2005. "Concentration of competing retail stores," Journal of Urban Economics, Elsevier, vol. 58(3), pages 488-512, November.
    9. Stahl, Dale O, II, 1989. "Oligopolistic Pricing with Sequential Consumer Search," American Economic Review, American Economic Association, vol. 79(4), pages 700-712, September.
    10. Janssen, Maarten C.W. & Moraga-Gonzalez, Jose Luis & Wildenbeest, Matthijs R., 2005. "Truly costly sequential search and oligopolistic pricing," International Journal of Industrial Organization, Elsevier, vol. 23(5-6), pages 451-466, June.
    11. Asher Wolinsky, 1983. "Retail Trade Concentration Due to Consumers' Imperfect Information," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 275-282, Spring.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mark Armstrong, 2017. "Ordered Consumer Search," Journal of the European Economic Association, European Economic Association, vol. 15(5), pages 989-1024.
    2. Paolo Crosetto & Alexia Gaudeul, 2014. "Choosing whether to compete: Price and format competition with consumer confusion," Jena Economics Research Papers 2014-026, Friedrich-Schiller-University Jena.
    3. Andrew Rhodes & Jidong Zhou, 2019. "Consumer Search and Retail Market Structure," Management Science, INFORMS, vol. 67(6), pages 2607-2623, June.
    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. Claudio-Pachecano, L. & Larralde, H., 2020. "Agglomeration or separation: Store patterns through an optimal location model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 542(C).
    6. Amit Pazgal & David Soberman & Raphael Thomadsen, 2022. "Consumer informedness: A key driver of differentiation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(2), pages 356-368, April.

    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. Parakhonyak, Alexei & Titova, Maria, 2018. "Shopping malls, platforms and consumer search," International Journal of Industrial Organization, Elsevier, vol. 58(C), pages 183-213.
    2. Konishi, Hideo, 2005. "Concentration of competing retail stores," Journal of Urban Economics, Elsevier, vol. 58(3), pages 488-512, November.
    3. Xuying Zhao & Arthur Lim & Hong Guo & Chao Ding & Jing-Sheng Song, 2019. "Retail Clusters in Developing Economies," Manufacturing & Service Operations Management, INFORMS, vol. 21(2), pages 452-467, May.
    4. Jenny Schuetz & Richard K. Green, 2014. "Is The Art Market More Bourgeois Than Bohemian?," Journal of Regional Science, Wiley Blackwell, vol. 54(2), pages 273-303, March.
    5. Gokhan Guven & Eren Inci & Antonio Russo, 2017. "Apparent Competition in Two-Sided Platforms," CESifo Working Paper Series 6660, CESifo.
    6. Konishi, Hideo & Sandfort, Michael T., 2002. "Expanding demand through price advertisement," International Journal of Industrial Organization, Elsevier, vol. 20(7), pages 965-994, September.
    7. Kultti Klaus, 2011. "Sellers Like Clusters," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 11(1), pages 1-28, December.
    8. Konishi, Hideo & Sandfort, Michael T., 2003. "Anchor stores," Journal of Urban Economics, Elsevier, vol. 53(3), pages 413-435, May.
    9. Berg, Nathan, 2008. "Imitation in location choice," MPRA Paper 26592, University Library of Munich, Germany.
    10. Sumon Datta & K. Sudhir, 2023. "The Agglomeration-Differentiation Tradeoff in Spatial Location Choice," Customer Needs and Solutions, Springer;Institute for Sustainable Innovation and Growth (iSIG), vol. 10(1), pages 1-25, December.
    11. Gokhan Guven & Eren Inci & Antonio Russo, 2022. "Competition, Concentration and Percentage Rent in Retail Leasing," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(2), pages 401-430, June.
    12. Andrew Rhodes & Jidong Zhou, 2019. "Consumer Search and Retail Market Structure," Management Science, INFORMS, vol. 67(6), pages 2607-2623, June.
    13. Ralph Braid, 2014. "The socially optimal and equilibrium locations of two stores or libraries with consumer search," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 53(1), pages 123-136, August.
    14. Heiko Karle & Martin Peitz & Markus Reisinger, 2020. "Segmentation versus Agglomeration: Competition between Platforms with Competitive Sellers," Journal of Political Economy, University of Chicago Press, vol. 128(6), pages 2329-2374.
    15. Schultz, Christian, 2004. "Market transparency and product differentiation," Economics Letters, Elsevier, vol. 83(2), pages 173-178, May.
    16. Mark Armstrong, 2017. "Ordered Consumer Search," Journal of the European Economic Association, European Economic Association, vol. 15(5), pages 989-1024.
    17. Paul Belleflamme & Martin Peitz, 2019. "Managing competition on a two‐sided platform," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(1), pages 5-22, January.
    18. Schuetz, Jenny, 2014. "Do art galleries stimulate redevelopment?," Journal of Urban Economics, Elsevier, vol. 83(C), pages 59-72.
    19. Picone, Gabriel A. & Ridley, David B. & Zandbergen, Paul A., 2009. "Distance decreases with differentiation: Strategic agglomeration by retailers," International Journal of Industrial Organization, Elsevier, vol. 27(3), pages 463-473, May.
    20. Gehrig, Thomas, 1998. "Competing markets," European Economic Review, Elsevier, vol. 42(2), pages 277-310, February.

    More about this item

    Keywords

    location choice; travel costs; pricing; consumer search;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:pra:mprapa:20044. 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: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    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.