Intra- and Interformat Competition Among Discounters and Supermarkets (original) (raw)

Market Structure and Competition in the Retail Discount Industry

Journal of Marketing Research, 2009

This article examines competition among Wal-Mart, Kmart, and Target using two distinct but related approaches. The authors first develop and estimate a discrete game in which each chain's store presence and format decisions in local markets depend on the decisions of its competitors and market characteristics. This analysis is extended to evaluate the determinants of store revenues for each chain in local markets as a function of market characteristics, including the presence of competing firms. These regressions use the results of the initial model to correct for the endogeneity of observed market structures. The results from both exercises illustrate several important asymmetries across the firms. Kmart and Wal-Mart prefer similar markets, but Wal-Mart's competitive position is dominant enough to prevent Kmart's operation in otherwise attractive markets. In contrast, Target prefers substantially different market characteristics. In total, the results support a view of ...

Local Competition and Impact of Entry by a Dominant Retailer

2005

This paper analyzes the competition between two spatially differentiated multi-product retailers who encounter entry from a dominant discount retailer. Our primary objective is to determine how entry affects the pricing and relative profits of the incumbent stores and the ...

The Dynamics of Retail Oligopolies

2005

This paper examines competition between retail firms using a dynamic model of strategic investment. Employing a panel dataset of store level observations spanning seven major retail industries, we propose and estimate a fully dynamic model of chain level competition. Since firm’s investment, entry, and exit decisions are modeled at the level of the chain, the unique, store level dataset that underlies our empirical results is aggregated to the firm level using a variety of industry sources. Building on the methods proposed by Bajari, Benkard, and Levin (2002), we employ a two-step estimation procedure in which policy functions are first estimated from each firm’s observed actions and outcomes are then matched to an equilibrium condition using forward simulation. The parameters of the structural model are then used to evaluate merger policy. ∗Department of Economics, Duke University, Durham NC 27708. Email: arie@econ.duke.edu. †Department of Economics, Duke University, Durham NC 2770...