Spatial Competition in the French Supermarket Industry

Abstract

Supermarket industry is one of the leading sectors in economic activity of developed countries, especially in France where it is extensively developed. However few empirical studies are to date …t market power at a local scale. This paper aims at building a structural model of demand a la Berry, Levinsohn, et Pakes (1995, 2004) that is able to estimate for a speci…c market (e.g. city, agglomeration) both stores’market power and economic consequences of a new entrant. We develop a consumer store choice model through a random coe¢ cient model where stores and consumers are spatially localized and consumers have preferences over both geographic proximity and stores’ characteristics. Using data from an agglomeration of South of France, we are able to estimate substitution patterns between stores. Thereafter we use these estimates