2018 Volume 48 Issue 1 Pages 85-102
This paper considers the location choices for spatial oligopoly markets. According to Sawai and Kunizaki ［10］, the supermarket stores in rural areas appear to act as Cournot-Nash competitors. However, supermarket stores located in urban areas may not behave as such competitors. For example, the stores in urban areas operate large size stores. Large store size affects the behavior of market competition and location choice in the urban areas. This characteristic may affect the behavior of market competition and location choice in the urban area.
We examined the attitude of market competition among the stores in the urban area. For this purpose, we used a conjectural variation model which extends Bresnahan and Reissl, ［3］ ［4］. From this theoretical model, we derived indexes that represent the degree of competitiveness and the entry thresholds of the stores. Next, we use an ordered-probit model to estimate the entry thresholds for each store. As a result, first, we found that large scale operation of supermarket stores causes declining competitiveness among the stores. Second, the abolition of regulations on large scale stores especially enhances cooperative behavior related to the location and operation size among stores.
These results suggest that each store decides the location to avoid competition with rival stores, and the market in the urban area becomes more collusive. This means that the markup rate of each store increases, and collusive behavior makes the consumer surplus worse.
JEL Classification:L11, L13, R30
