Photo Source: Pixabay.com

Photo Source: Pixabay.com

Spatial and Two-Sector Competition in The South Korean
Retail Market

Self-employment accounts for a notable portion of Korean economics--but also a portion that is weak. For this reason, Koreans believe that policies are needed to protect the self-employed. Since franchised self-employed stores takes a lot of portion, a minimum distance policy, which restricts a new entrance of same franchised store, has been the most widely requested. To understand the impact of such a policy, I set up a structural model of the entry game in small retail stores in Seoul. To allow for the existence of two types of stores, franchise convenience and traditional, I apply Mazzeo's (2002) approach. Based on the estimated results, the simulation is conducted to calculate the different numbers of stores with and without an existing minimum distance policy. Simulation results show that this policy increases 15 traditional stores by decreasing 9 convenience stores in average. However, new cooperate grocery stores can eliminate impact of the minimum distance policy.