Competition in Large Markets /
This paper develops a simple and robust implication of free entry followed by competition without substantial strategic interactions: Increasing the number of consumers leaves the distributions of producers' prices and other choices unchanged. In many models featuring non-trivial strategic cons...
Gespeichert in:
- 1. Verfasser:
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- Format:
- Elektronisch E-Book
- Sprache:
- Englisch
- Veröffentlicht:
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Cambridge, Mass.
National Bureau of Economic Research
2005.
- Zusammenfassung:
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This paper develops a simple and robust implication of free entry followed by competition without substantial strategic interactions: Increasing the number of consumers leaves the distributions of producers' prices and other choices unchanged. In many models featuring non-trivial strategic considerations, producers' prices fall as their numbers increase. Hence, examining the relationship between market size and producers' actions provides a nonparametric tool for empirically discriminating between these distinct approaches to competition. To illustrate its application, I examine observations of restaurants' seating capacities, exit decisions, and prices from 224 U.S. cities. Given factor prices and demographic variables, increasing a city's size increases restaurants' capacities, decreases their exit rate, and decreases their prices. These results suggest that strategic considerations lie at the heart of restaurant pricing and turnover.
- Umfang:
- 1 online resource: illustrations (black and white);
- Anmerkungen:
- December 2005.
- Schlagworte: