A Search-Theoretic Interpretation of Multi-outlet Retailers.

Why do retailing firms operate several chains of stores, each of which is in apparent competition with the others? This paper demonstrates that by increasing the number of, apparently independent, stores it controls, a firm can discourage consumer search and increase its market power. It is also shown that an increased share of outlets controlled by a multi-outlet firm allows both single-outlet firms and the multi-outlet firm to raise price and thereby increase profit. These results also imply that once the traditional one-firm, one-outlet assumption is relaxed, sequential search models may become unstable. Copyright 1996 by The Economic Society of Australia.