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Seasonal Demand and Net Entry

Michael Gmeiner ()
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Michael Gmeiner: Northwestern University

Economics Bulletin, 2019, vol. 39, issue 2, 1135-1143

Abstract: This paper explores the relationship of seasonality of demand with net entry. Using data on the poured concrete contracting industry from 2007-2012, it is shown that increases in the seasonality of demand, as measured by the ratio of first quarter to annual construction payroll, predict less exit within each county in the time period around the Great Recession. IV estimation uses weather patterns to instrument payroll measures and supports conclusions. It is suggested that in seasonal industries, firms may reach capacity constraints in the high season, in turn reducing competition and reducing exit through increased profits. A model of Bertrand competition with capacity constraints and seasonal demand is presented.

Keywords: Strategic exit; seasonal demand; net entry; capacity constraints. (search for similar items in EconPapers)
JEL-codes: L1 L8 (search for similar items in EconPapers)
Date: 2019-05-15
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