Empirical Analysis of Retail Competition: Spatial Differentiation at Wal-Mart, Amazon.Com, and Their Competitors
Empirical Analysis of Retail Competition: Spatial Differentiation at Wal-Mart, Amazon.com, and Their Competitors Lesley Chiou [Job Market Paper] February 1, 2005 Abstract This paper quantifies the degree of competition and spatial differentiation across different retail channels by exploiting a unique dataset that describes a consumer’s choice of store, product of purchase, item price, and demographics. For each household, I collect information on the location and distance of nearby stores. Then I estimate a consumer’s choice of retailer in the sales market for DVDs among online, mass merchant, electronics, video specialty, and music stores. Using a discrete choice model, I allow for unobserved heterogeneity in preferences for store types and disutility of travel. A consumer’s traveling cost varies by income, and substitution occurs proportionately more among stores of the same type. Conditional on price and distance, the average consumer still prefers Wal-Mart over most other stores. In addition, consumers’ shopping patterns across store types vary significantly by gender, education, and the presence of children. * I would like to thank Glenn Ellison, Nancy Rose, Paul Joskow, and Sara Fisher Ellison for advice and helpful suggestions. This paper has benefited from conversations with Emek Basker, Melissa Boyle, Norma Coe, Jerry Hausman, Joanna Lahey, Allison McKie, Erich Muehlegger, Aviv Nevo, Whitney Newey, Kenneth Train, Joan Walker, Birger Wernerfelt, and participants of the MIT Industrial Organization Workshop and Econometrics Lunch. I am particularly grateful to Alexander and Associates for allowing me access to the data used in this study; I would also like to extend my thanks to Adams Media Research and Tax Data Systems.
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