Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Gothenburg, Department of Economics

No 170: Entry into Local Retail Food Markets in Sweden: A Real-Options Approach

Sven-Olov Daunfeldt (), Matilda Orth () and Niklas Rudholm ()
Additional contact information
Sven-Olov Daunfeldt: The Swedish Research Institute of Trade (HUI), Postal: SE-103 29, Stockholm, Sverige
Matilda Orth: Department of Economics, School of Economics and Commercial Law, Göteborg University, Postal: Box 640, SE 405 30 GÖTEBORG
Niklas Rudholm: Department of Economics, Umeå University, Postal: SE-901 87 Umeå , Sverige

Abstract: A real-options approach was used, incorporating uncertainty and irreversibility of investments, to study the number of stores entering the Swedish retail food market during the period 1994-2002. It was found that uncertainty affected the entry-decision. Entry was less frequent in highly concentrated local retail food-markets characterized by a high degree of uncertainty, whereas higher profit opportunities seem to have increased the probability of entry.

Keywords: Real options; uncertainty; retail food; entry; negative binomial regression

JEL-codes: L13; L81

27 pages, May 17, 2005

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