Optical coherence elastography (OCE) is emerging as a method to image the mechanical properties of tissue on the microscale. However, the spatial resolution, a main advantage of OCE, has not been investigated and is not trivial to evaluate. To address this, we present a framework to analyze resolution in phase-sensitive compression OCE that incorporates the three main determinants of resolution: mechanical deformation of the sample, detection of this deformation using optical coherence tomography (OCT), and signal processing to estimate local axial strain. We demonstrate for the first time, through close correspondence between experiment and simulation of structured phantoms, that resolution in compression OCE is both spatially varying and sample dependent, which we link to the discrepancies between the model of elasticity and the mechanical deformation of the sample. We demonstrate that resolution is dependent on factors such as feature size and mechanical contrast. We believe that the analysis of image formation provided by our framework can expedite the development of compression OCE.