Entry, exit, and the determinants of market structure

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: This paper estimates a dynamic, structural model of entry and exit in an oligopolistic industry and uses it to quantify the determinants of market structure and long-run firm values for two U.S. 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 all found to be important determinants of long-run firm values, firm turnover, and market structure. Estimates for the dentist industry allow the entry cost to differ for geographic markets that were designated as Health Professional Shortage Areas and in which entry was subsidized. The estimated mean entry cost is 11 percent lower in these markets. Using simulations, we compare entry-cost versus fixed-cost subsidies and find that entry-cost subsidies are less expensive per additional firm. Terms of use: Documents inJEL classification: L11, L13, L84

Analyzing the Dental Market Through Porter�s Five Forces Framework

“…• Concentration of Providers: The prohibitive costs associated with setting up a dental practice in many countries, as highlighted by Dunn [1] lead to a concentration of providers in certain regions, thus limiting competition.…”

“…In most of the developed high-income countries, the dental market exhibits significant barriers to entry, primarily due to the high costs of dental education, practice set-up and equipment, and compliance with stringent regulations. The research by Dunne [1] highlights these barriers, emphasizing the financial and regulatory hurdles new dental providers must overcome. This high entry threshold limits the influx of new competitors, thereby shaping the market's competitive landscape.…”

Incumbent defense strategies and new entrants market exit: the moderating role of relational market-based assets

“…Prior research on market exit has documented various firm- and market-level factors as antecedents of a firms’ market exit decisions. Market-level factors such as competitive intensity and market demand (Agarwal and Gort, 1996; Dunne et al , 2013; Pe’er et al , 2016) and firm-level factors such as firm size, firm age, technological capabilities, entry timing, pre-entry experience and mode of entry have been suggested as antecedents of a market exit (Franco et al , 2009; Johnson and Tellis, 2008; Sinha and Noble, 2008; Srinivasan et al , 2004, 2008; Suarez et al , 2015). Surprisingly, extant literature has been silent on two important issues: How incumbents’ defensive strategies in response to market entry influence NEs’ market exit decisions? How the context in which these strategies are used influences their effectiveness? …”

Digital highways and firm turnover

“…We also add to the long‐standing literature on the determinants of firm entry and exit (Bain, 2013; Bruno et al, 2013; Caves, 1998; Dunne et al, 2013; Geroski, 1995, among others). In particular, we speak to the recent literature that emphasizes the role of broadband internet in fostering firm entry (Duvivier & Bussière, 2022; Hasbi, 2020; McCoy et al, 2018, among others), especially in ICT‐intensive sectors (Hjort & Poulsen, 2019).…”