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Title: Intra- and inter-channel competition in local-service sectors
Authors: Cleeren, K
Dekimpe, Marnik
Verboven, Frank
Issue Date: 2005
Publisher: K.U.Leuven - Departement toegepaste economische wetenschappen
Series Title: DTEW Research Report 0535 pages:1-36
Abstract: Although economically very important, local-service sectors have received little attention in the extensive literature on competitive interactions. Detailed data gathering in these sectors is hard, not only because of the multitude of local players, but also because key service dimensions are hard to quantify. Using empirical entry models, we show how to infer information on these sectors' degree of intra- and inter-channel competition from the observed entry decisions in different local markets. The approach also controls for relevant socio-demographic characteristics of the trading area that may affect performance. We apply the proposed empirical entry model to the video-rental market. Additional entries of video stores are found to significantly increase the level of intra-channel competition. Unlike the predictions of many normative economic models, we find this increase to be larger when the entry occurs in a duopoly than in a monopoly, a pattern consistent with recent experimental research on collusive behavior in oligopolies. We also find evidence of inter-channel cannibalization from the upstream channel (movie theatres), but not from the downstream channel (premium cable). Finally, various socio-demographic characteristics of the trading zone, such as income and household size, are found to also have a significant impact on store performance.
Publication status: published
KU Leuven publication type: IR
Appears in Collections:Research Centre for Marketing and Consumer Science, Leuven
Research Center of Econometrics, Leuven

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