Working Paper: CEPR ID: DP9604
Authors: Philip Ushchev; Igor Sloev; Jacques-François Thisse
Abstract: We combine spatial and monopolistic competition to study market interactions between downtown retailers and an outlying shopping mall. Consumers shop at either marketplace or at both, and buy each variety in volume. The market solution stems from the interplay between the market expansion effect generated by consumers seeking more opportunities, and the ccompetition effect. Firms' profitsincrease (decrease) with the entry of local competitors when the former (latter) dominates. Downtown retailers swiftly vanish when the mall is large. A predatory but efficient mall need not be regulated, whereas the regulator must restrict the size of a mall accommodating downtown retailers.
Keywords: monopolistic competition; retailers; shopping behavior; shopping mall; spatial comparison
JEL Codes: D43; L81; R10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| mall size (L25) | viability of downtown retailers (R33) |
| market expansion effect (F69) | attractiveness of shopping location (R32) |
| competition effect (D41) | consumption of varieties (D11) |
| market expansion effect dominates (F69) | disappearance of downtown retailers (R33) |
| mall size increases (L25) | disappearance of downtown retailers (R33) |
| mall developer is efficient (D61) | regulation may not be necessary (L51) |