Disaggregate Modelling and Decisions of Retail Firms: A Case Study of Clothing Retailers

Abstract

A general theory of the decisions made by retail firms with regard to location, number of employees, and the amount of floor space rented is reviewed. This theory, originally developed by the authors in a previous paper, leads to a multinomial probit disaggregate choice model with some of the attributes endogenously determined. This paper is a sequel to that earlier work. The application of this model to clothing retailers in the Boston Metropolitan area is described, and results of models estimated from a survey of such stores are reported. Some specific inferences regarding the behavior of clothing retailers are drawn, and more general conclusions regarding the usefulness of the theory are discussed.