A SEARCH-THEORETIC INTERPRETATION OF MULTI-OUTLET RETAILERS

Why do retailing firms operate several chains of stores, each of which is in appal ent competition with the others? This paper demonstrates that by ina-easing the number of, apparently independent, stores it co ntrols, 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-o utlet firm to raise price and thereby increase profit. These results a lso imply that once the traditional one-firm, one-outlet assumption is relaxed, sequential search models may become unstable.