Entry-Deterring Capacity in the Texas Lodging Industry
"This paper empirically tests whether capacity is used to deter entry and whether the amount invested in entry-deterring capacity is related to market concentration and market presence. We use a unique dataset containing 3,830 lodging properties in Texas from 1991 through 1997. We find that there is higher investment in capacity relative to demand (i.e., idle capacity) in markets with a larger Herfindahl index and by firms with a larger share of market capacity. These results are consistent with the entry deterrence literature that suggests firms in more concentrated markets and firms with a larger market share have greater incentive to invest in entry-deterring capacity." Copyright 2006, The Author(s) Journal Compilation (c) 2006 Blackwell Publishing.
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Volume (Year): 15 (2006)
Issue (Month): 1 (03)
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