Spatial competition between shopping centers

Abstract

We study competition between two shopping centers (department stores or shopping malls) located at the extremes of a linear city. In contrast with the existing literature, we do not restrict consumers to make all their purchases at a single place. We obtain this condition as an equilibrium result. In the case of competition between a shopping mall and a department store, we find that the shops at the mall, taken together, obtain a lower profit than the department store. However, the shops at the mall have no incentives to merge into a department store (both sides would lose). It is the department store that has incentives to separate itself into a shopping mall (both sides win).