Market structure and entry : where's the beef?
Toivanen, Otto and Waterson, Michael, 1950- (2001) Market structure and entry : where's the beef? Discussion Paper. [Coventry]: University of Warwick, Department of Economics. Warwick economic research papers (No.593).
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We study the effects of market structure on entry using data from the UK fast food (counter-service burger) industry over the years 1991-1995. Over this period, the market can be characterized as a duopoly. We find that market structure matters greatly: for both firms, rival presence increases the probability of entry.
We control for market specific time-invariant unobservables and their correlation with existing outlets of both firms through a variety of methods. Such unobservables generally play a minor role. For both firms, variable profits per customer are increasing in the number of own outlets, and decreasing in the number of rival outlets. Structural form estimations show that the positive effect of rival presence on the probability of entry is due to firm learning: rival presence increases the estimate of the size of the market. The firms are differently affected by demand variables and have different fixed costs of entry. These results strongly
suggest the presence of product differentiation, firm learning and market power.
|Item Type:||Working or Discussion Paper (Discussion Paper)|
|Subjects:||H Social Sciences > HC Economic History and Conditions|
|Divisions:||Faculty of Social Sciences > Economics|
|Library of Congress Subject Headings (LCSH):||Fast food restaurants -- Great Britain, Food industry and trade -- Great Britain, Chain restaurants -- Great Britain, Duopolies, Industrial organization (Economic theory)|
|Series Name:||Warwick economic research papers|
|Publisher:||University of Warwick, Department of Economics|
|Place of Publication:||[Coventry]|
|Official Date:||January 2001|
|Number of Pages:||55|
|Institution:||University of Warwick|
|Access rights to Published version:||Open Access|
|Funder:||Economic and Social Research Council (Great Britain) (ESRC), Suomen Akatemia [Academy of Finland], Yrjö Jahnssonin säätiö [Yrjö Jahnsson Foundation], University of Warwick|
|Version or Related Resource:||Toivanen, O. and Waterson, M. (2005). Market structure and entry: where's the beef? The Rand Journal of Economics, 36(3), pp.680-699.|
Berry, S.T. (1992). Estimation of a Model of Entry in the Airline Industry. Econometrica, 60, pp. 889-917.
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