Drawing on a small but growing literature, this note argues that consumer behavior may be as important as firm behavior for the level of competition in consumer industries such as retailing. We use data on 1.948 retail stores in India and contribute to the literature in three ways. First, we find that the number of non-workers in the household, a proxy for time cost of shopping, has a large effect on competition. Moving from the city with the least to the most number of non-workers increases competition by 84% of its mean level. Second, as suggested in the literature, we find that moving from the richest to the poorest city increases competition by 50% of its mean level. However, much of this effect is due to more non-workers in the poorer cities rather than any independent effect of income. Third, we report on a number of interesting and somewhat surprising findings on the level of competition in India relative to other countries, how it varies across small vs. large stores and metropolitan vs. non-metropolitan cities.
- Consumer behavior,
Available at: http://works.bepress.com/mohammad_amin/12/