Dynamic model of entry: Dollar stores

Dollar stores have become the fastest-growing retail format in United States. However, there is considerable controversy regarding their entry, particularly into markets without grocery stores, and concerns that dollar-store entry decisions are motivated by preemptive incentives. In this paper, we aim to study market of dollar as an equilibrium phenomenon examine impact on competing store formats a dynamic environment. We use census-tract level data develop model oligopolistic competition estimate other retailers same formats. find supermarkets large-format owners thrive expansion removes “competitive fringe” shared markets, whereas small-format (other convenience superettes) do not. Our findings broad implications for effect consumer welfare, not associated with grocery-store exit but rather stores.