Barriers to Entry and Profitability
Barriers to entry are regarded as major impediments to the working of markets. Entry must not necessarily actually take place - the perceived threat of entry may encourage incumbent firms to behave as if they are in a competitive market, even if they are not. We present empirical evidence on effects of perceived threat of entry on profitability. Using information from managers about how they assess the existence of entry barriers a strong impact of these assessments on profitability is confirmed. The number and the relative size of competitors also exert considerable effects. We find no statistically significant relation between the perceived threat of entry and the actual number of firms if the size of the relevant market is taken into account.
|Date of creation:||2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.zew.de/Email:
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.:
- Jeffrey R. Campbell & Hugo Hopenhayn, 2003.
"Market size matters,"
Working Paper Series
WP-03-12, Federal Reserve Bank of Chicago.
- Jeffrey Campbell, 2000. "Market Size Matters," Econometric Society World Congress 2000 Contributed Papers 1225, Econometric Society.
- Jeffrey R. Campbell & Hugo A. Hopenhayn, 2002. "Market Size Matters," NBER Working Papers 9113, National Bureau of Economic Research, Inc.
- Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 421-440, December.
- Kraft, Kornelius & Czarnitzki, Dirk, 2004.
"On the Profitability of Innovative Assets,"
ZEW Discussion Papers
04-38, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Schmalensee, Richard, 1989.
"Inter-industry studies of structure and performance,"
Handbook of Industrial Organization,
in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 16, pages 951-1009
- Schmalensee, Richard., 1987. "Inter-industry studies of structure and performance," Working papers 1874-87., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Shaked, Avner & Sutton, John, 1982. "Relaxing Price Competition through Product Differentiation," Review of Economic Studies, Wiley Blackwell, vol. 49(1), pages 3-13, January.
- Czarnitzki, Dirk & Kraft, Kornelius, 2004. "Innovation indicators and corporate credit ratings: evidence from German firms," Economics Letters, Elsevier, vol. 82(3), pages 377-384, March.
- Gaskins, Darius Jr., 1971. "Dynamic limit pricing: Optimal pricing under threat of entry," Journal of Economic Theory, Elsevier, vol. 3(3), pages 306-322, September.
- Sutton, John, 2007. "Market Structure: Theory and Evidence," Handbook of Industrial Organization, Elsevier.
- Glenn Ellison & Sara Fisher Ellison, 2007.
"Strategic Entry Deterrence and the Behavior of Pharmaceutical Incumbents Prior to Patent Expiration,"
NBER Working Papers
13069, National Bureau of Economic Research, Inc.
- 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.
- Bulow, Jeremy & Geanakoplos, John & Klemperer, Paul, 1985. "Holding Idle Capacity to Deter Entry [The Role of Investment in Entry Deterrence]," Economic Journal, Royal Economic Society, vol. 95(377), pages 178-82, March.
- Shaanan, Joseph, 1997. "Idle sunk cost capacity, entry, and profitability: An empirical study," Journal of Economics and Business, Elsevier, vol. 49(3), pages 267-283.
- A. Michael Spence, 1977. "Entry, Capacity, Investment and Oligopolistic Pricing," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 534-544, Autumn.
- Preston R. Fee & Hugo M. Mialon & Michael A. Williams, 2004. "What Is a Barrier to Entry?," American Economic Review, American Economic Association, vol. 94(2), pages 461-465, May.
- Berry, Steven & Reiss, Peter, 2007. "Empirical Models of Entry and Market Structure," Handbook of Industrial Organization, Elsevier.
When requesting a correction, please mention this item's handle: RePEc:zbw:zewdip:7414. 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: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.