Meanwhile from the unintended consquences department

Does Planning Regulation Protect Independent Retailers? by Raffaella Sadun

Abstract:

Regulations aimed at curbing the entry of large retail stores have
been introduced in many countries to protect independent retailers.
Analyzing a planning reform launched in the United Kingdom in the
1990s, I show that independent retailers were actually harmed by the
creation of entry barriers against large stores. Instead of simply
reducing the number of new large stores entering a market, the entry
barriers created the incentive for large retail chains to invest in
smaller and more centrally located formats, which competed more
directly with independents and accelerated their decline. Overall,
these findings suggest that restricting the entry of large stores
does not necessarily lead to a world with fewer stores, but one with
different stores, with uncertain competitive effects on independent
retailers.

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5 Responses to Meanwhile from the unintended consquences department

  1. Patrick says:

    Or “Department of no shit”.

  2. desipis says:

    Regulations aimed at curbing the entry of large retail stores have
    been introduced in many countries to protect independent retailers… created the incentive for large retail chains to invest in smaller and more centrally located formats.

    How much was the argument for “protecting independent retailers” based on the justification of ensuring consumers had access to “smaller and more centrally located” shops, which would have otherwise been unavailable if made economically unviable by new larger stores? (i.e. did the regulation actually achieve its aim, just not in the way some people were hoping?)

  3. derrida derider says:

    What desipis said. While I think the communitarians have it quite wrong here the fact is that these sort of restrictions are usually justified as “protecting local community identity” not “nobbling the competition”. Of course the realities of politics mean the stated grounds are typically the former while the real grounds are typically the latter, but on this paper’s reckoning those stated goals were largely achieved even if the real goals weren’t.

  4. FDB says:

    What those last two said.

  5. Alphonse says:

    The result may be good in and of itself if more transit oriented and vibrant centres result, rather than sterile monster centres serving car-based isochrones. For competitive benefit, perhaps look to other measures – like non-duopolistic limits to market share, the market extending way beyond individual centres. The Coles-Woolworths duopoloy, for example, is a patent regulatory failure, whatever the size and location mix of their outlets.

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