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Yue Cao Publications

Publish Date
Discussion Paper
Abstract

A common tactic to estimate willingness-to-travel exploits variation in the relative proximity of consumers to supplier locations. The validity of these estimates relies on the exogeneity of that consumer-supplier distance. We argue that distance to suppliers is endogenous because suppliers strategically choose locations to target consumers; we introduce a novel instrument to address this form of endogeneity. Using geolocation data from millions of smartphones, we estimate consumer preferences for specific retail chains across income groups and regions. We show that accounting for distance endogeneity significantly alters willingness-to-travel measures. Contrary to the prevailing “retail apocalypse” narrative, we find that consumer surplus per trip to general merchandise stores did not significantly decline from 2010 to 2019. For the lowest-income consumers, the expansion of national chains, particularly dollar stores, nearly compensates for the closure of traditional department stores and regional chains. Notably, failing to account for distance endogeneity leads to the erroneous conclusion that lower-income households experienced statistically significant consumer surplus declines.