Dunne, Timothy
[VerfasserIn]
;
Xu, Daniel Yi
[Sonstige Person, Familie und Körperschaft];
Roberts, Mark J.
[Sonstige Person, Familie und Körperschaft];
Klimek, Shawn D.
[Sonstige Person, Familie und Körperschaft]National Bureau of Economic Research
Entry, Exit, and the Determinants of Market Structure
Erschienen:
Cambridge, Mass: National Bureau of Economic Research, September 2009
Erschienen in:NBER working paper series ; no. w15313
Umfang:
1 Online-Ressource
Sprache:
Englisch
DOI:
10.3386/w15313
Identifikator:
Reproduktionsnotiz:
Hardcopy version available to institutional subscribers
Entstehung:
Anmerkungen:
Mode of access: World Wide Web
System requirements: Adobe [Acrobat] Reader required for PDF files
Beschreibung:
Market structure is determined by the entry and exit decisions of individual producers. These decisions are driven by expectations of future profits which, in turn, depend on the nature of competition within the market. In this paper we estimate a dynamic, structural model of entry and exit in an oligopolistic industry and use it to quantify the determinants of market structure and long-run firm values for two U.S. service industries, dentists and chiropractors. We find that entry costs faced by potential entrants, fixed costs faced by incumbent producers, and the toughness of short-run price competition are all important determinants of long run firm values and market structure. As the number of firms in the market increases, the value of continuing in the market and the value of entering the market both decline, the probability of exit rises, and the probability of entry declines. The magnitude of these effects differ substantially across markets due to differences in exogenous cost and demand factors and across the dentist and chiropractor industries. Simulations using the estimated model for the dentist industry show that pressure from both potential entrants and incumbent firms discipline long-run profits. We calculate that a seven percent reduction in the mean sunk entry cost would reduce a monopolist's long-run profits by the same amount as if the firm operated in a duopoly