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An Empirical Model of Firm Entry with Endogenous Product-type Choices

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  • Katja Seim Author-Email: kseim@wharton.upenn.edu Author-Workplace-Name: University of Pennsylvania

Abstract

I describe a model of entry with endogenous product-type choices. These choices are formalized as the outcomes of a game of incomplete information in which rivals' differentiated products have nonuniform competitive effects on profits. I estimate the model for location choices in the video retail industry using a nested fixed-point algorithm solution. The results imply significant returns to product differentiation. Simulations illustrate the trade off between demand and intensified competition and the extent to which markets with more scope for differentiation support greater entry.

Suggested Citation

  • Katja Seim Author-Email: kseim@wharton.upenn.edu Author-Workplace-Name: University of Pennsylvania, 2006. "An Empirical Model of Firm Entry with Endogenous Product-type Choices," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 619-640, Autumn.
    • Handle: RePEc:rje:randje:v:37:y:2006:3:p:619-640
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    Cited by:

    1. repec:ebl:ecbull:v:12:y:2008:i:15:p:1-10 is not listed on IDEAS
    2. Chiou, Lesley, 2008. "The timing of movie releases: Evidence from the home video industry," International Journal of Industrial Organization, Elsevier, vol. 26(5), pages 1059-1073, September.
    3. Stijn Ferrari, 2010. "Discriminatory fees, coordination and investment in shared ATM networks," Working Paper Research 184, National Bank of Belgium.
    4. Clarissa Yeap, 2008. "Price markups in oligopoly models with differentiated products," Economics Bulletin, AccessEcon, vol. 12(15), pages 1-10.
    5. Andrew Sweeting, 2009. "The strategic timing incentives of commercial radio stations: An empirical analysis using multiple equilibria," RAND Journal of Economics, RAND Corporation, vol. 40(4), pages 710-742, December.
    6. Darlene Chisholm & George Norman, 2012. "Spatial competition and market share: an application to motion pictures," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 36(3), pages 207-225, August.
    7. Li, Shanjun & Liu, Yanyan & Deininger, Klaus W., 2009. "How Important are Peer Effects in Group Lending? Estimating a Static Game of Incomplete Information," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49497, Agricultural and Applied Economics Association.
    8. Xosé-Luís Varela-Irimia, 2012. "Profitability, uncertainty and multi-product firm product proliferation: The Spanish car industry," Working Papers XREAP2012-16, Xarxa de Referència en Economia Aplicada (XREAP), revised Sep 2012.
    9. Haizhen Lin & Yijia Wang, 2012. "Competition and Price Discrimination in the Parking Garage Industry," Working Papers 2012-07, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    10. Yi Deng & Gabriel Picone, 2013. "Strategic Clustering and Competition by Alcohol Retailers: An Emperical Anlysis of Entry and Location Decisions," Working Papers 1013, University of South Florida, Department of Economics.
    11. Naomi Hausman, 2012. "University Innovation, Local Economic Growth, and Entrepreneurship," Working Papers 12-10, Center for Economic Studies, U.S. Census Bureau.

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