Spatial nonprice competition:A network approach

Abstract

We empirically assess the nature and strength of strategic interactions in industries with spatial nonprice competition. Given that the utilities provided by firms to consumers are unobserved to the researcher, our identification strategy relies on longitudinal data and on the occurrence of firm-levelshocks. We use the notion of centrality introduced by network theorists,constructing centrality indicators based on the economy's Leontief matrix.From the evolution of local market shares, we estimate the link between the firms' responses to the shocks and the centrality indicators. The results inour application strongly suggest that the utilities provided by hospitals to patients are strategic complements.