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The Dynamics of Market Structure and Market Size in Two Health Services Industries

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Author Info
Timothy Dunne
Mark Roberts
Shawn Klimek
Yi Xu

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Abstract

The relationship between the size of a market and the competitiveness of the market has been of long-standing interest to IO economists. Empirical studies have used the relationship between the size of the geographic market and both the number of firms in the market and the average sales of the firms to draw inferences about the degree of competition in the market. This paper extends this framework to incorporate the analysis of entry and exit flows. A key implication of recent entry and exit models is that current market structure will likely depend upon history of past participation. The paper explores these issues empirically by examining producer dynamics for two health service industries, dentistry and chiropractic services. We find that the number of potential entrants and past number of incumbent firms are correlated with current market structure. The empirical results also show that as market size increases the number of firms rises less than proportionately, firm size increases, and average productivity increases. However, the magnitude of the correlations are sensitive to the inclusion of the market history variables.

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File URL: http://webserver01.ces.census.gov/index.php/ces/1.00/cespapers?down_key=101799
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Publisher Info
Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 07-26.

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Length: 35 pages
Date of creation: Oct 2007
Date of revision:
Handle: RePEc:cen:wpaper:07-26

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

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  1. Pesendorfer, Martin & Schmidt-Dengler, Philipp, 2003. "Identification and Estimation of Dynamic Games," CEPR Discussion Papers 3965, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. 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.
  3. Michael J. Mazzeo, 2002. "Product Choice and Oligopoly Market Structure," RAND Journal of Economics, The RAND Corporation, vol. 33(2), pages 221-242, Summer.
  4. Sanghamitra Das & Mark J. Roberts & James R. Tybout, 2007. "Market Entry Costs, Producer Heterogeneity, and Export Dynamics," Econometrica, Econometric Society, vol. 75(3), pages 837-873, 05. [Downloadable!] (restricted)
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  5. Allan Collard-Wexler, 2006. "Plant Turnover and Demand Fluctuations in the Ready-Mix Concrete Industry," Working Papers 06-08, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
  6. Chad Syverson, 2004. "Market Structure and Productivity: A Concrete Example," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1181-1222, December.
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  7. Victor Aguirregabiria & Pedro Mira, 2007. "Sequential Estimation of Dynamic Discrete Games," Econometrica, Econometric Society, vol. 75(1), pages 1-53, 01. [Downloadable!] (restricted)
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  8. 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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  9. Ariel Pakes & Michael Ostrovsky & Steve Berry, 2004. "Simple Estimators for the Parameters of Discrete Dynamic Games (with Entry/Exit Examples)," Harvard Institute of Economic Research Working Papers 2036, Harvard - Institute of Economic Research. [Downloadable!]
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  10. Asplund, Marcus & Sandin, Rickard, 1999. "The Number of Firms and Production Capacity in Relation to Market Size," Journal of Industrial Economics, Blackwell Publishing, vol. 47(1), pages 69-85, March. [Downloadable!] (restricted)
  11. Ron S Jarmin & Javier Miranda, 2002. "The Longitudinal Business Database," Working Papers 02-17, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
  12. 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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  13. 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)
  14. Steven Berry & Joel Waldfogel, 2003. "Product Quality and Market Size," NBER Working Papers 9675, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  15. Marcus Asplund & Volker Nocke, 2006. "Firm Turnover in Imperfectly Competitive Markets-super-1," Review of Economic Studies, Blackwell Publishing, vol. 73(2), pages 295-327, 04. [Downloadable!] (restricted)
  16. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-50, September. [Downloadable!] (restricted)
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