Very simple markov-perfect industry dynamics: Empirics

Arbeitspapier

This paper develops an econometric model of firm entry, competition, and exit in oligopolistic markets. The model has an essentially unique symmetric Markov-perfect equilibrium, which can be computed very quickly. We show that its primitives are identified from market-level data on the number of active firms and demand shifters, and we implement a nested fixed point procedure for its estimation. Estimates from County Business Patterns data on U.S. local cinema markets point to tough local competition. Sunk costs make the industry's transition following a permanent demand shock last 10 to 15 years.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2018-17

Classification and Topics

• Classification: Wirtschaft ; Oligopoly and Other Imperfect Markets ; Single Equation Models; Single Variables: Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities ; Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
• Subject: demand uncertainty ; dynamic oligopoly ; firm entry and exit ; nested fixed point estimator ; sunk costs ; toughness of competition ; counterfactual policy analysis

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Abbring, Jaap H. ; Campbell, Jeffrey R. ; Tilly, Jan ; Yang, Nan
• Event: Veröffentlichung
• (who): Federal Reserve Bank of Chicago
• (where): Chicago, IL
• (when): 2018

Further information

• DOI: doi:10.21033/wp-2018-17
• Handle: http://hdl.handle.net/10419/200587
• Last update: 10.03.2025, 11:41 AM CET