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Spatial Competition in Retail Markets: Movie Theaters

Peter Davis
The RAND Journal of Economics
Vol. 37, No. 4 (Winter, 2006), pp. 964-982
Published by: Wiley on behalf of RAND Corporation
Stable URL: http://www.jstor.org/stable/25046283
Page Count: 19
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Spatial Competition in Retail Markets: Movie Theaters
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Abstract

Retail markets are extremely important, but economists have few practical tools for analyzing the way dispersed buyers and sellers affect the properties of markets. I develop an econometric model of retail demand in which products are location specific and consumers have preferences over both geographic proximity and other store and product characteristics. The model uses data on the observed geographic distribution of consumers within a market to (1) help explain observed variation in market shares and (2) affect predicted substitution patterns between stores. Using data from the U.S. cinema industry, I use the estimated model to evaluate the form of consumer transport costs, the effect of a theater's price and quality choices on rivals, the effects of geographic differentiation, and the nature and extent of market power.

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