Fields: Industrial Organization,
Urban Economics, Applied Micro
Zone Pricing and Strategic Interaction: Evidence from Drywall (with Kevin R. Williams)
Retail chains often set a uniform price for zones that combine very different markets. We call the friction that prevents the expected market-level pricing ``spatial menu costs.'' We develop an empirical model of competive zone pricing that includes these costs. We apply it to retail drywall, using a rich, original data set for this industry. With structural demand and cost estimates, we estimate prices and profits under different pricing regimes to find bounds on the spatial menu costs needed to induce firms to adopt their existing zone pricing systems. We find that even small spatial menu costs can prompt zone pricing and deter retailers from using market power in their monopoly markets. Our model connects with an earlier theoretical literature on price discrimination in oligopoly markets where we find that when both firms adopt finer pricing zones, industry profits decrease.
Does Organizational Form Drive Competition? Evidence from Coffee Retailing (with Joshua Gans, Richard Hayes, and Ryan Lampe)
NBER Working Paper w22548
This article examines patterns of entry and exit in a relatively homogeneous product market to investigate the impact of entry on incumbent firms and market structure. In particular, we are interested in whether the organizational form of entrants matters for the competitive decisions of incumbents. We assess the impact of chain stores on independent retailers in the Melbourne coffee market using annual data on the location and entry status of 4,768 coffee retailers between 1991 and 2010. The long panel enables us to include market fixed effects to address the endogeneity of store locations. Logit regressions indicate that chain stores have no discernible effect on the exit or entry decisions of independent stores. However, each additional chain store increases the probability of another chain store exiting by 2.5 percentage points, and each additional independent cafe increases the probability of another independent cafe exiting by 0.5 percent. These findings imply that neighboring independents and chains operate almost as though they are in separate markets. We offer additional analysis suggesting consumer information as a cause of this differentiation.
Motor vehicle manufacturing in North America has been geographically clustered for most of its history, but the agglomeration forces that maintained such clustering have not prevented an industry migration in recent decades. As production migrates, states have offered large subsidies to new assembly plants in hopes of also attracting a cluster of suppliers. This paper uses supplier and assembly plant locations from 1986 to 2011 to estimate a dynamic structural model of suppliers' site selection and plant closure decisions. The model contains terms for various local costs and for agglomeration effects. It models future expectations of costs and assembler locations, which otherwise would bias static models. Finally, this paper estimates the locations of suppliers under counter-factual placement of assembly plants; this provides case-specific estimates for the additional employment gains a successful assembly plant subsidy bid generates.
The employment impact of motor vehicle assembly plant openings
Regional Science and Urban Economics. Volume 58: pages 57-70. (May 2016)
October 2015 working paper
Circulation statistics in the evaluation of collection development
Collection Building. Volume 27, Issue 2: pages 71-73. (2008)
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