Working Paper No. 984

Entry Regulations, Product Differentiation and Determinants of Market Structure

Published: October 11, 2013, revised July 2014Pages: 55Keywords: Imperfect competition; Product differentiation; Retail markets; Entry; Exit; Sunk costsJEL-codes: L11; L13; L81

Entry Regulations, Product Differentiation and Determinants of Market Structure Florin Maican and Matilda Orth


We use a dynamic oligopoly model of entry and exit to evaluate how entry regulations affect profitability and market structure in retail. The model incorporates demand and store-level heterogeneity. Based on unique data for all retail food stores in Sweden, we find that the average entry costs for small and large stores are 10 and 18 percent lower, respectively, in markets with liberal compared with restrictive regulations. Counterfactual simulations show that lower entry costs in restrictive markets result in higher entry rates and allow us to quantify the consequences of regulations in light of trade-offs between small and large stores.

Matilda Orth

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Mob: +46 736 42 38 24
matilda.orth@ifn.se

Florin Maican

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Ph: +46 31 786 4866
Mob: +46 76 235 3039
florin.maican@ifn.se

Interdisciplinary European Studies

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This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

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