Multi-store Competition: Market Segmentation or Interlacing
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This paper develops a model for multi-store competition between firms. Using the fact that different firms have different outlets and produce horizontally differentiated goods, we obtain a pure strategy equilibrium where firms choose a different location for each outlet and firms' locations are interlaced. The location decisions of multi-store firms are completely independent of each other. Firms choose locations that minimize transportation costs of consumers. Moreover, generically, the subgame perfect equilibrium is unique and when the firms have an equal number of outlets, prices are independent of the number of outlets.
- I18 : Government Policy; Regulation; Public Health
- Z13 : Social Norms and Social Capital; Social Networks
- E10 : General Aggregative Models: General
- transportation costs