Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 1386: Entry Regulations and Product Variety in Retail

Matilda Orth () and Florin Maican ()
Additional contact information
Matilda Orth: Research Institute of Industrial Economics (IFN), Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Florin Maican: Department of Economics, University of Gothenburg,, Postal: and Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden

Abstract: We study how changes in competition from entry regulations impact stores’ incentives to adjust product variety. Using Swedish data, we estimate a dynamic model of endogenous product offerings where stores utilize multiproduct technology to generate sales. The median long-run benefit of adding one more product category is 20 percent higher in restrictive than in liberal markets. Counterfactuals show that more liberal regulation spurs repositioning and increases variety, especially in rural markets, driven by a new mechanism of productivity gains and cost reductions. Strong liberalization enhances product entry in markets with restrictive regulation but less in rural markets with limited demand.

Keywords: Retail; Entry regulations; Competition dynamics; Variety; Productivity

JEL-codes: L11; L13; L81

Language: English

89 pages, First version: April 1, 2021. Revised: September 13, 2024. Earlier revisions: April 10, 2022, May 23, 2023, April 25, 2024.

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