This Website uses cookies. By using this website you are agreeing to our use of cookies and to the terms and conditions listed in our data protection policy. Read more

Working Paper No. 1386

Entry Regulations and Product Variety in Retail

Working Paper
Reference
Orth, Matilda and Florin Maican (2021). “Entry Regulations and Product Variety in Retail”. IFN Working Paper No. 1386. Stockholm: Research Institute of Industrial Economics (IFN).

Authors
Matilda Orth, Florin Maican

This paper evaluates the impact of entry regulations on stores’ incentives to reposition product variety and long-run performance. We estimate a dynamic model of store adjustments in product variety and inputs where stores use a multiproduct service technology to generate sales. Using rich Swedish data on stores and product categories, we find that more liberal regulation spurs repositioning in product variety and productivity. Counterfactual simulations show that modest liberalizations of entry incentivize incumbents to adjust the product categories offered to consumers while increasing efficiency and sales per category. Generous liberalizations of entry induce net exit of product categories and harm incumbents in markets with limited demand. Cost subsidies can help to reduce regional differences, allowing consumers and incumbents to obtain more long-term benefits, especially in rural markets.

Matilda Orth

+46 (0)8 665 4531
+46 (0)736 42 38 24
matilda.orth@ifn.se

Florin Maican

+46 (0)31 786 4866
+46 (0)76 235 3039
florin.maican@ifn.se