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The Production Decisions of Large Competitors: Detecting Cost Advantages and Strategic Behavior in Restaurants

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Author Info
Clarissa Yeap
Abstract

This paper evaluates firm profitability in the highly competitive restaurant industry by comparing variation in firm size and production decisions with variation in market size. In the Census microdata, I find that multi-unit firms operate a greater number of restaurants and larger individual restaurants in larger MSAs. They also increase production intensity by increasing production during operating hours, extending operating hours, increasing the volume of meals and non-meals output. These results are generally consistent with full capacity exploitation in efficient firms, rather than underutilization by firms seeking to limit rivalry through excess capacity or product proliferation.

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File URL: http://www.ces.census.gov/index.php/ces/cespapers?down_key=101759
File Format: application/pdf
File Function: First version, 2006
Download Restriction: no

Publisher Info
Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 06-19.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 38 pages
Date of creation: Jul 2006
Date of revision:
Handle: RePEc:cen:wpaper:06-19

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Web page: http://www.ces.census.gov

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  2. Avner Shaked & John Sutton, 1990. "Multiproduct Firms and Market Structure," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 45-62, Spring. [Downloadable!] (restricted)
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  4. Jeffrey R. Campbell, 2005. "Competition in large markets," Working Paper Series WP-05-16, Federal Reserve Bank of Chicago. [Downloadable!]
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  5. 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)
  6. Timothy F. Bresnahan & Peter C. Reiss, 1987. "Do Entry Conditions Vary across Markets?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(1987-3), pages 833-882. [Downloadable!]
  7. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring. [Downloadable!] (restricted)
  8. Krishna B. Kumar & Raghuram G. Rajan & Luigi Zingales, . "What Determines Firm Size?," CRSP working papers 496, Center for Research in Security Prices, Graduate School of Business, University of Chicago. [Downloadable!]
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  9. Michael J. Mazzeo, 2002. "Product Choice and Oligopoly Market Structure," RAND Journal of Economics, The RAND Corporation, vol. 33(2), pages 221-242, Summer.
  10. A. Michael Spence, 1977. "Entry, Capacity, Investment and Oligopolistic Pricing," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 534-544, Autumn. [Downloadable!] (restricted)
  11. Perloff, Jeffrey M & Salop, Steven C, 1985. "Equilibrium with Product Differentiation," Review of Economic Studies, Blackwell Publishing, vol. 52(1), pages 107-20, January. [Downloadable!] (restricted)
  12. Deneckere, Raymond J & Rothschild, Michael, 1992. "Monopolistic Competition and Preference Diversity," Review of Economic Studies, Blackwell Publishing, vol. 59(2), pages 361-73, April. [Downloadable!] (restricted)
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  13. Jeffrey R. Campbell & Hugo A. Hopenhayn, 2005. "Market Size Matters," Journal of Industrial Economics, Blackwell Publishing, vol. 53(1), pages 1-25, 03. [Downloadable!] (restricted)
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  14. Steven T. Berry & Joel Waldfogel, 1999. "Free Entry and Social Inefficiency in Radio Broadcasting," RAND Journal of Economics, The RAND Corporation, vol. 30(3), pages 397-420, Autumn. [Downloadable!] (restricted)
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  15. Sam Peltzman, 1977. "The Gains and Losses From Industrial Concentration," NBER Working Papers 0163, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June. [Downloadable!] (restricted)
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  17. Shaked, Avner & Sutton, John, 1982. "Relaxing Price Competition through Product Differentiation," Review of Economic Studies, Blackwell Publishing, vol. 49(1), pages 3-13, January. [Downloadable!] (restricted)
  18. Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 977-1009, October. [Downloadable!] (restricted)
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  19. Demsetz, Harold, 1973. "Industry Structure, Market Rivalry, and Public Policy," Journal of Law & Economics, University of Chicago Press, vol. 16(1), pages 1-9, April.
  20. Steven T. Berry & Joel Waldfogel, 1999. "Mergers, Station Entry, and Programming Variety in Radio Broadcasting," NBER Working Papers 7080, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  21. Scherer, F M, 1979. "The Causes and Consequences of Rising Industrial Concentration," Journal of Law & Economics, University of Chicago Press, vol. 22(1), pages 191-208, April.
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