Drugstore market in Chile: Spatial competition?

Abstract

Competition in the Chilean drugstore market has been recently disputed, based on a price-fixing case involving the three major drugstore chains. However, firms also compete in other dimensions such as geographical location of stores. Using an original dataset, this paper describes the geographical distribution of the three major pharmacy chains’ stores at national, regional and municipal level. The results show that: i) drugstores tend to agglomerate in certain geographical areas; ii) there are many municipalities in which the three main drugstore chains do not have a single store and; iii) one of the firms (Cruz Verde) has a location strategy different from its competitors. The goal of the paper is to describe the national drugstore market, understood as a first step to identify the way in which firms do (or do not) compete by location, as well as its implications for consumers.