Incumbency advantages,distribution networks and exclusivity — Evidence from the European car markets |
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| Institution: | 1. Research Foundation — Flanders (FWO), University of Leuven, Belgium;2. University of Leuven, Belgium;3. C.E.P.R. London, United Kingdom;1. School of Computer Science and Technology, Nanjing University of Posts and Telecommunications, Nanjing, 210023, China;2. Jiangsu Key Laboratory of Big Data Security and Intelligent Processing, Nanjing University of Posts and Telecommunications, Nanjing, 210023, China;3. School of Computer Engineering, Jiangsu University of Technology, Changzhou, 231001, China;4. Institute of Advanced Technology, Nanjing University of Posts and Telecommunications, Nanjing, 210023, China;5. Fujian Provincial Key Laboratory of Information Processing and Intelligent Control, Minjiang University, Fuzhou, 350121, China;6. School of Computer & Software, Nanjing University of Information Science & Technology, Nanjing, 210044, China;1. College of Automation, Nanjing University of Posts and Telecommunications, Nanjing 210046, China;2. School of Computer, Wuhan University, Wuhan 430072, China;3. Institute of Advanced Technology, Nanjing University of Posts and Telecommunications, Nanjing 210046, China;4. College of Telecommunications and Information Engineering, Nanjing University of Posts and Telecommunications, Nanjing, 210046, China;5. College of Computer, Nanjing University of Posts and Telecommunications, Nanjing, 210046, China |
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| Abstract: | This paper investigates the role of distribution networks in explaining incumbency advantages in the European car market. We compare three approaches to incorporate the size of distribution networks in discrete choice models of product differentiation: as an extra product characteristic, as a new dimension of product differentiation in a nested logit framework, or as a measure of the expected travel cost under a spatial Poisson distribution of locations. We obtain robust conclusions across all three approaches: distribution networks play an important role in explaining car producers' market shares, but they only appear to explain part of the bias towards domestic brands in the car market. We also report on an ongoing research project where we analyze the role of distribution networks at a much more detailed local market level, and investigate the specific role of exclusive dealing as a possible entry barrier. |
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