Location And Competitive Behavior In Retailing

Author : Isabelle M. Nilsson
Publisher :
ISBN 13 :
Total Pages : 149 pages
Book Rating : 4.:/5 (951 download)

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Download or read book The Influence of Competition on Retail Firm Location written by Isabelle M. Nilsson and published by . This book was released on 2015 with total page 149 pages. Available in PDF, EPUB and Kindle. Book excerpt: Store location is regarded as a primary driver of retail competition and one of the most important factors in a consumer's store choice decision. In order to explain differences in the relative location between competing retailers a game theoretic model is applied to the study of firm location choices under varying degrees of strategic interaction. The theoretical results contribute to the existing literature by explaining why certain types of retailers may want to locate in close proximity to their competition despite increased price competition. While theoretical results are dependent on the assumptions made, realized outcomes of firms’ location decisions provide insights regarding underlying location behaviors. For this purpose a multivariate spatial statistic is developed aimed at identifying different interaction patterns between competing stores. In order to define when two outlets are located relatively close to each other, a topological proximity criterion is derived based on the theoretical framework. Multivariate spatial statistic has received relatively little attention in the literature when compared to univariate methods. Therefore the statistic developed in this thesis not only proposes a new methodology aimed at distinguishing between different firm location behaviors, it also contributes to the existing literature on multivariate point pattern methods. The proposed statistic has asymptotic properties, and its distribution is approximately normal for larger samples. Tests of finite sample properties and robustness checks are conducted through simulations by varying assumptions with regards to population size, expected values, as well as interactions between categories of points and underlying spatial processes. The simulation results confirm that the proposed statistic has the ability to capture not only asymmetrical relationship but also distinguish pairwise categorical associations from clustering in the joint population. To demonstrate the usefulness of the statistic, it is applied to competing stores in two different retail sectors in order to detect any differences in the relative location between competitors. The application of the statistic to real world location data shows that observed patterns are effectively captured by the proposed statistic and easily interpreted using presented theory. This dissertation also examines whether access to transportation infrastructure may induce retailers to locate in close proximity to one another. For this analysis the statistic is applied to measure whether there is a significant difference in interaction patterns between competing outlets located in proximity to important transportation infrastructure and those that are not. The results suggest that transportation infrastructure affects the nature of the location behavior of retail firms with respect to the relative location of their competitors. The findings from this dissertation suggest that public policy has different welfare effects depending on the demand conditions in different retail sectors. Therefore broader impacts arise from establishing theoretical and empirical evidence that not only improves our understanding of difference in relative location between competitors in different retail sectors but also clarifies the consequences of public policy.