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Distance decreases with differentiation: Strategic agglomeration by retailers

Publication ,  Journal Article
Picone, GA; Ridley, DB; Zandbergen, PA
Published in: International Journal of Industrial Organization
May 1, 2009

Theory predicts intense price competition results when firms cluster with rivals. Yet, strong evidence of clustering is found in previous empirical research. Researchers typically measure clustering by comparing observed location patterns to random assignment. The random assignment benchmark does not, however, account for zoning and geography and therefore might overstate the extent of strategic agglomeration. As evidence, we find that public elementary schools cluster more than random, not because of agglomeration economies, but due to demand density and limited location options. We argue that a better measurement of strategic agglomeration is to compare across product markets with similar zoning and other location restrictions but different benefits from agglomeration. We use L-function analysis of five product markets in five cities. We find that retailers with greater ability to differentiate their products are more likely to strategically cluster. © 2008 Elsevier B.V. All rights reserved.

Duke Scholars

Published In

International Journal of Industrial Organization

DOI

ISSN

0167-7187

Publication Date

May 1, 2009

Volume

27

Issue

3

Start / End Page

463 / 473

Related Subject Headings

  • Economics
  • 3803 Economic theory
  • 3801 Applied economics
  • 3507 Strategy, management and organisational behaviour
  • 1403 Econometrics
  • 1402 Applied Economics
  • 1401 Economic Theory
 

Citation

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Picone, G. A., Ridley, D. B., & Zandbergen, P. A. (2009). Distance decreases with differentiation: Strategic agglomeration by retailers. International Journal of Industrial Organization, 27(3), 463–473. https://doi.org/10.1016/j.ijindorg.2008.11.007
Picone, G. A., D. B. Ridley, and P. A. Zandbergen. “Distance decreases with differentiation: Strategic agglomeration by retailers.” International Journal of Industrial Organization 27, no. 3 (May 1, 2009): 463–73. https://doi.org/10.1016/j.ijindorg.2008.11.007.
Picone GA, Ridley DB, Zandbergen PA. Distance decreases with differentiation: Strategic agglomeration by retailers. International Journal of Industrial Organization. 2009 May 1;27(3):463–73.
Picone, G. A., et al. “Distance decreases with differentiation: Strategic agglomeration by retailers.” International Journal of Industrial Organization, vol. 27, no. 3, May 2009, pp. 463–73. Scopus, doi:10.1016/j.ijindorg.2008.11.007.
Picone GA, Ridley DB, Zandbergen PA. Distance decreases with differentiation: Strategic agglomeration by retailers. International Journal of Industrial Organization. 2009 May 1;27(3):463–473.
Journal cover image

Published In

International Journal of Industrial Organization

DOI

ISSN

0167-7187

Publication Date

May 1, 2009

Volume

27

Issue

3

Start / End Page

463 / 473

Related Subject Headings

  • Economics
  • 3803 Economic theory
  • 3801 Applied economics
  • 3507 Strategy, management and organisational behaviour
  • 1403 Econometrics
  • 1402 Applied Economics
  • 1401 Economic Theory