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Market Structure and Entry: Where's the Beef?

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Author Info
Otto Toivanen () (HECER, University of Helsinki)
Michael Waterson () (University of Warwick)

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Abstract

We study the effects of market structure on entry using data from the U.K. fast food (counter-service burger) industry over the years 1991--1995, for which the market can be characterized as a duopoly. We use both reduced-form estimations and a structural model, controlling for market-specific time-invariant unobservables. For both firms, we find that market structure matters greatly. Specifically, rival presence increases the probability of entry by increasing expected market size, whereas variable profits per customer are increasing in the number of own outlets. Our results suggest the presence of product differentiation, firm learning, and market power. Ordering information: This article can be ordered from https://pubs3.rand.org/cgi-bin/rje/pdf.cgi.

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Publisher Info
Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 36 (2005)
Issue (Month): 3 (Autumn)
Pages: 680-699
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Handle: RePEc:rje:randje:v:36:y:2005:3:p:680-699

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Chevalier, Judith A, 1995. "Capital Structure and Product-Market Competition: Empirical Evidence from the Supermarket Industry," American Economic Review, American Economic Association, vol. 85(3), pages 415-35, June. [Downloadable!] (restricted)
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  3. Milgrom, Paul & Roberts, John, 1982. "Limit Pricing and Entry under Incomplete Information: An Equilibrium Analysis," Econometrica, Econometric Society, vol. 50(2), pages 443-59, March. [Downloadable!] (restricted)
  4. Geisel, Martin S. & Narasimhan, Chakravarthi & Sen, Subrata K., 1993. "Quantifying the competitive impact of a new entrant," Journal of Business Research, Elsevier, vol. 26(3), pages 263-277, March. [Downloadable!] (restricted)
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  6. Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring. [Downloadable!] (restricted)
  7. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, vol. 90(357), pages 95-106, March. [Downloadable!] (restricted)
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  8. Reiss, Peter C, 1996. "Empirical Models of Discrete Strategic Choices," American Economic Review, American Economic Association, vol. 86(2), pages 421-26, May. [Downloadable!] (restricted)
  9. Butler, J S & Moffitt, Robert, 1982. "A Computationally Efficient Quadrature Procedure for the One-Factor Multinomial Probit Model," Econometrica, Econometric Society, vol. 50(3), pages 761-64, May. [Downloadable!] (restricted)
  10. Dean R. Hyslop, 1999. "State Dependence, Serial Correlation and Heterogeneity in Intertemporal Labor Force Participation of Married Women," Econometrica, Econometric Society, vol. 67(6), pages 1255-1294, November.
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  12. Pakes, Ariel & Pollard, David, 1989. "Simulation and the Asymptotics of Optimization Estimators," Econometrica, Econometric Society, vol. 57(5), pages 1027-57, September. [Downloadable!] (restricted)
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  14. Berry, Steven T, 1992. "Estimation of a Model of Entry in the Airline Industry," Econometrica, Econometric Society, vol. 60(4), pages 889-917, July. [Downloadable!] (restricted)
  15. Toivanen, Otto & Waterson, Michael, 2000. "Empirical research on discrete choice game theory models of entry: An illustration," European Economic Review, Elsevier, vol. 44(4-6), pages 985-992, May. [Downloadable!] (restricted)
  16. Colin Cameron, A. & Windmeijer, Frank A. G., 1997. "An R-squared measure of goodness of fit for some common nonlinear regression models," Journal of Econometrics, Elsevier, vol. 77(2), pages 329-342, April. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Sault, Joanne & Toivanen, Otto & Waterson, Michael, 2003. "Learning and Location," The Warwick Economics Research Paper Series (TWERPS) 693, University of Warwick, Department of Economics. [Downloadable!]
  2. Sault, Joanne & Toivanen, Otto & Waterson, Michael, 2002. "Fast Food - the early years : Geography and the growth of a chain-store in the UK," The Warwick Economics Research Paper Series (TWERPS) 655, University of Warwick, Department of Economics. [Downloadable!]
    Other versions:
  3. stefano comino, 2005. "Entry and Exit With Information Externalities," Industrial Organization 0510006, EconWPA. [Downloadable!]
    Other versions:
  4. Sault, Joanne & Toivanen, Otto & Waterson, Michael, 2003. "Market Structure And Entry In Fast Food," The Warwick Economics Research Paper Series (TWERPS) 661, University of Warwick, Department of Economics. [Downloadable!]
  5. Andrew M. Cohen & Michael J. Mazzeo, 2004. "Using market structure to assess differentiation between retail depository institutions," Proceedings, Federal Reserve Bank of Chicago, issue May, pages 255-266. [Downloadable!]
  6. Andew Cohen & Michael Mazzeo, 2004. "Market structure and competition among retail depository institutions," Finance and Economics Discussion Series 2004-04, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  7. Xiao, Mo & Orazem, Peter, 2006. "Do Entry Conditions Vary over Time? Entry and Competition in the Broadband Market: 1999-2003," Staff General Research Papers 12500, Iowa State University, Department of Economics. [Downloadable!]
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