Delivery in the city: Differentiated products competition among New York restaurants

Abstract

We examine the response to entry in a large market with differentiated products using a novel longitudinal dataset of over 550,000 New York City restaurant menus from 68 consecutive weeks. We compare “treated” restaurants facing a nearby entrant to “control” restaurants with no new competition, matching restaurants using location characteristics and a pairwise distance measure based on menu text. Restaurants frequently adjust prices and product offerings but we find no evidence that they respond differentially to new competition. However, restaurants in locations with an entrant count in the top decile—areas with many new competitors—are 22% more likely to exit after a year than restaurants in the lowest entry decile.