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

Non, Marielle (2010): Isolation or joining a mall? On the location choice of competing shops.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: location choice; travel costs; pricing; consumer search
• Subjects: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure; Size Distribution of Firms; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search; Learning; Information and Knowledge; Communication; Belief

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