{"id":218,"date":"2020-07-27T15:59:31","date_gmt":"2020-07-27T19:59:31","guid":{"rendered":"https:\/\/www.charlotteren.net\/?p=218"},"modified":"2025-12-11T15:24:17","modified_gmt":"2025-12-11T20:24:17","slug":"7-responses-to-rival-exit-product-variety-market-expansion-and-preexisting-market-structure","status":"publish","type":"post","link":"https:\/\/www.charlotteren.net\/?p=218","title":{"rendered":"[7]. Responses to Rival Exit: Product Variety, Market Expansion, and Preexisting Market Structure"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\"><strong>Charlotte Ren, Ye Hu, and Tony H. Cui<\/strong>. <a href=\"https:\/\/onlinelibrary.wiley.com\/doi\/full\/10.1002\/smj.2970\"><em>Strategic Management Journal.<\/em><\/a> 2019, 40(2): 253-276. <a href=\"https:\/\/doi.org\/10.1002\/smj.2970\">https:\/\/doi.org\/10.1002\/smj.2970<\/a><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Research Summary<\/strong>. This study investigates incumbent responses to a main rival\u2019s exit. We argue that long\u2010time rivals have developed an equilibrium by offering a mix of overlapping and unique products and by choosing geographic proximity to each other. A rival\u2019s exit, however, disrupts this equilibrium and motivates surviving firms to expand in both product and geographic spaces to seek a new equilibrium. Using data from all U.S. Best Buy stores before and after the exit of Circuit City, we find that Best Buy uses product variety expansion as its major response in markets where Circuit City was colocated, but it more often responds by opening new stores in non\u2010colocated markets. Regardless of preexisting market structures, the magnitude of product variety expansion decreases with the opening of new stores.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Managerial Summary<\/strong>. How do surviving firms respond to a major rival\u2019s exit? By studying Best Buy\u2019s responses to Circuit City\u2019s withdrawal, we find the survivor expands in both product space (increasing product variety) and geographic space (opening new stores), due to two motives. First, the survivor strives to fill in \u201choles\u201d left in the market. Second, the survivor experiences uncertainty in the post\u2010exit world wherein its reference point is gone, threat of potential entry looms, and it lacks information about new entrants. Thus, it must deter potential entry <em>ex ante by<\/em> preempting many prime product and geographic locations. Best Buy also responds according to preexisting market structures, primarily through product variety expansion in markets wherein Circuit City was colocated and through opening new stores in non\u2010colocated markets.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Note:<\/strong> <a href=\"https:\/\/www.charlotteren.net\/wp-content\/uploads\/2018\/10\/Ren.Hu_.Cui-2018-SMJ_Responses-to-Rival-Exit-1.pdf\">Click here for the Ren.Hu.Cui 2019 SMJ Paper.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Charlotte Ren, Ye Hu, and Tony H. Cui. Strategic Management Journal. 2019, 40(2): 253-276. https:\/\/doi.org\/10.1002\/smj.2970 Research Summary. This study investigates incumbent responses to a main rival\u2019s exit. We argue that long\u2010time rivals have developed an equilibrium by offering a mix of overlapping and unique products and by choosing geographic proximity to each other. A rival\u2019s [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[1],"tags":[9,22,36,35,29,8,30,37],"class_list":["post-218","post","type-post","status-publish","format-standard","hentry","category-published-13","tag-competition","tag-endogeneity","tag-geographic-proximity","tag-industry-shock","tag-market-entry-and-exit","tag-product-variety","tag-response","tag-retail-industry"],"_links":{"self":[{"href":"https:\/\/www.charlotteren.net\/index.php?rest_route=\/wp\/v2\/posts\/218","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.charlotteren.net\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.charlotteren.net\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.charlotteren.net\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.charlotteren.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=218"}],"version-history":[{"count":10,"href":"https:\/\/www.charlotteren.net\/index.php?rest_route=\/wp\/v2\/posts\/218\/revisions"}],"predecessor-version":[{"id":504,"href":"https:\/\/www.charlotteren.net\/index.php?rest_route=\/wp\/v2\/posts\/218\/revisions\/504"}],"wp:attachment":[{"href":"https:\/\/www.charlotteren.net\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=218"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.charlotteren.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=218"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.charlotteren.net\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=218"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}