ABSTRACT

This paper examines competition between two main retailers, Wal-Mart and Target, in the context of expansion strategies. I use a structural model assuming that the firms are forward-looking and engage in dynamic strategies forming a Markov perfect equilibrium (MPE). The results show different expansion strategies and the asymmetric impact of the competitor’s presence on each retailer. Target must operate in a comfort zone to benefit from the spillover effects of Wal-Mart’s presence and avoid cannibalizing its own stores. On the other hand, Wal-Mart dominates most market structures and is not impacted significantly by Target. This result can be generalized to the case where small retailers benefit from clustering with their own stores and competitors’ stores. An implication is that competing retailers engage in back-and-forth expansion strategies as one tries to penetrate a market and the other tries to defend. However, unlimited expansion results in cannibalization. The fixed cost for Target also contains a comfort zone due to a quadratic relationship with the number of stores owned, but the relationship is monotonically increasing for Wal-Mart. Another notable result is that Target’s fixed cost per store added can be as high as nine times that of Wal-Mart. Overall, the results show that primary and secondary players can co-exist in the same market to reap benefits despite having different scales of operations. The results provide practical implications for policymakers who can use these insights to design retail and zoning regulations that protect local shops and maintain fair competition.

摘要

本文研究了在扩张战略背景下两家主要零售商沃尔玛和塔吉特之间的竞争。我使用一种结构模型，假设这些公司具有前瞻性并参与形成马尔可夫完美均衡（MPE）的动态策略。结果显示了不同的扩张策略以及竞争对手在每个零售商中的存在所带来的不对称影响。塔吉特公司必须在一个舒适的区域内运营，才能从沃尔玛业务的溢出效应中受益，并避免蚕食自己的商店。另一方面，沃尔玛主导了大多数市场结构，并且不受塔吉特的重大影响。该结果可以推广到小型零售商从自己的商店和竞争对手的商店聚集中受益的情况。这意味着竞争的零售商在一个试图打入市场而另一个试图捍卫时，则采用来回扩展策略。但是，无限扩展会导致食人化。由于与所拥有商店的数量呈二次关系，Target的固定成本还包含一个舒适区，但沃尔玛的关系单调增加。另一个值得注意的结果是，Target每增加一家商店的固定成本可能高达沃尔玛的9倍。总体而言，结果表明，尽管经营规模不同，主要参与者和次要参与者可以共存于同一市场中以获取收益。结果为决策者提供了实际的含义，他们可以利用这些见识来设计零售和分区法规，以保护本地商店并保持公平竞争。