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

  • Clarissa Yeap
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    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: ftp://ftp2.census.gov/ces/wp/2006/CES-WP-06-19.pdf
    File Function: First version, 2006
    Download Restriction: no

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

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    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.census.gov/ces
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    18. Richard Schmalensee, 1978. "Entry Deterrence in the Ready-to-Eat Breakfast Cereal Industry," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 305-327, Autumn.
    19. Paul Milgrom & John Roberts, 1998. "Limit Pricing and Entry Under Incomplete Information: An Equilibrium Analysis," Levine's Working Paper Archive 245, David K. Levine.
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