Entry, exit, and the determinants of market structure

Timothy Dunne, Shawn D. Klimek, Mark J. Roberts, Daniel Yi Xu

Research output: Contribution to journalArticle

31 Scopus citations

Abstract

This article estimates a dynamic, structural model of entry and exit for two US service industries: dentists and chiropractors. Entry costs faced by potential entrants, fixed costs faced by incumbent producers, and the toughness of short-run price competition are important determinants of long-run firm values, firm turnover, and market structure. In the dentist industry entry costs were subsidized in geographic markets designated as Health Professional Shortage Areas (HPSA) and the estimated mean entry cost is 11 percent lower in these markets. Using simulations, we find that entry cost subsidies are less expensive per additional firm than fixed cost subsidies.

Original languageEnglish (US)
Pages (from-to)462-487
Number of pages26
JournalRAND Journal of Economics
Volume44
Issue number3
DOIs
StatePublished - Sep 1 2013

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All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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