A Gap for Me: Entrepreneurs and Entry
We present a theory of entrepreneurial entry and exit decisions. Knowing their own managerial talent, entrepreneurs decide which market to enter, where markets differ in size. We obtain a striking sorting result: each entrant in a large market is more efficient than any entrepreneur in a smaller market since competition is endogenously more intense in larger markets. This result continues to hold when entrepreneurs can export their output to other markets, thereby incurring a unit transport cost or tariff. The sorting and price competition effects imply that the number of entrants (and hence product variety) may actually be smaller in larger markets. In the stochastic dynamic extension of the model, we show that the churning rate of entrepreneurs is higher in larger markets.
|Date of creation:||30 Jun 2003|
|Date of revision:||29 Sep 2005|
|Contact details of provider:|| Postal: |
Web page: http://economics.sas.upenn.edu/pier
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Combes, Pierre-Philippe & Duranton, Gilles & Gobillon, Laurent, 2004.
"Spatial Wage Disparities: Sorting Matters!,"
CEPR Discussion Papers
4240, C.E.P.R. Discussion Papers.
- Khan, M. Ali & Sun, Yeneng, 1995. "Extremal structures and symmetric equilibria with countable actions," Journal of Mathematical Economics, Elsevier, vol. 24(3), pages 239-248.
- repec:att:wimass:8904 is not listed on IDEAS
- repec:att:wimass:8827 is not listed on IDEAS
- Donald R. Davis & David E. Weinstein, 2001.
"Market Size, Linkages, and Productivity: A Study of Japanese Regions,"
NBER Working Papers
8518, National Bureau of Economic Research, Inc.
- Davis, Donald R. & Weinstein, David E., 2003. "Market Size, Linkages, and Productivity: A Study Of Japanese Regions," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
- Sveikauskas, Leo A, 1975. "The Productivity of Cities," The Quarterly Journal of Economics, MIT Press, vol. 89(3), pages 393-413, August.
- Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-50, September.
- Chad Syverson, 2001.
"Market Structure and Productivity: A Concrete Example,"
01-06, Center for Economic Studies, U.S. Census Bureau.
- 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.
- Chad Syverson, 2004. "Market Structure and Productivity: A Concrete Example," NBER Working Papers 10501, National Bureau of Economic Research, Inc.
- Mark Doms & Eric J. Bartelsman, 2000.
"Understanding Productivity: Lessons from Longitudinal Microdata,"
Journal of Economic Literature,
American Economic Association, vol. 38(3), pages 569-594, September.
- Eric J. Bartelsman & Mark Doms, 2000. "Understanding productivity: lessons from longitudinal microdata," Finance and Economics Discussion Series 2000-19, Board of Governors of the Federal Reserve System (U.S.).
- Holmes, Thomas J & Schmitz, James A, Jr, 1990.
"A Theory of Entrepreneurship and Its Application to the Study of Business Transfers,"
Journal of Political Economy,
University of Chicago Press, vol. 98(2), pages 265-94, April.
- Bernard, A., 1997.
"Exceptional Exporter Performance: Cause, Effect, or Both?,"
97-21, Massachusetts Institute of Technology (MIT), Department of Economics.
- Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, vol. 47(1), pages 1-25, February.
- Andrew B. Bernard & J. Bradford Jensen, 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," NBER Working Papers 6272, National Bureau of Economic Research, Inc.
- Henderson, J. Vernon, 1986. "Efficiency of resource usage and city size," Journal of Urban Economics, Elsevier, vol. 19(1), pages 47-70, January.
- Richard E. Baldwin & Frederic Robert-Nicoud, 2000. "Free trade agreements without delocation," Canadian Journal of Economics, Canadian Economics Association, vol. 33(3), pages 766-786, August.
- Volker Nocke, 2000.
"Monopolisation and Industry Structure,"
Econometric Society World Congress 2000 Contributed Papers
0429, Econometric Society.
- Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
- Asplund, Björn Marcus & Nocke, Volker, 2000. "Imperfect Competition, Market Size and Firm Turnover," CEPR Discussion Papers 2625, C.E.P.R. Discussion Papers.
- Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-27, August.
- Davis, Steven J. & Haltiwanger, John, 1999. "Gross job flows," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 41, pages 2711-2805 Elsevier.
- Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 53-82, January.
When requesting a correction, please mention this item's handle: RePEc:pen:papers:05-026. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dolly Guarini)
If references are entirely missing, you can add them using this form.