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Entry-Deterring Capacity in the Texas Lodging Industry

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  • Michael Conlin
  • Vrinda Kadiyali

Abstract

"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.

Suggested Citation

  • Michael Conlin & Vrinda Kadiyali, 2006. "Entry-Deterring Capacity in the Texas Lodging Industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(1), pages 167-185, March.
  • Handle: RePEc:bla:jemstr:v:15:y:2006:i:1:p:167-185
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    Citations

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    Cited by:

    1. Hernán Herrera Echeverry, 2007. "Lanzamiento de nuevas marcas en industrias de productos homogéneos básicos con altos niveles de concentración," DOCUMENTOS DE TRABAJO CIEF 011812, UNIVERSIDAD EAFIT.
    2. Kyle Wilson, 2016. "Does Public Competition Crowd Out Private Investment? Evidence from Municipal Provision of Internet Access," Working Papers 16-16, NET Institute.
    3. Glenn Ellison & Sara Fisher Ellison, 2011. "Strategic Entry Deterrence and the Behavior of Pharmaceutical Incumbents Prior to Patent Expiration," American Economic Journal: Microeconomics, American Economic Association, vol. 3(1), pages 1-36, February.
    4. Arturs Kalnins, 2006. "Markets: The U.S. Lodging Industry," Journal of Economic Perspectives, American Economic Association, vol. 20(4), pages 203-218, Fall.
    5. Hernán Herrera Echeverry, 2008. "Innovación e incumbent failure: Una ilustración usando la industria de las telecomunicaciones en Colombia," DOCUMENTOS DE TRABAJO CIEF 011811, UNIVERSIDAD EAFIT.
    6. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107069978, March.
    7. Vroom, Govert & Mccann, Brian T., 2009. "Ownership structure, profit maximization, and competitive behavior," IESE Research Papers D/800, IESE Business School.
    8. Helmers, Claes Gustav & Connor, John M. & Florax, Raymond J.G.M. & Vroom, Govert, 2009. "Entry, Ownership Form, and Spatial Location: An Analysis of the Hotel Industry," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49561, Agricultural and Applied Economics Association.

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