Does the fourth entrant make any difference?: Entry and competition in the early U.S. broadband market

Mo Xiao and Peter Orazem

International Journal of Industrial Organization, 2011, vol. 29, issue 5, 547-561

Abstract: We study the importance of sunk costs in determining entry conditions and inferences about firm conduct in an adapted Bresnahan and Reiss (1991, 1994) framework. In our framework, entrants incur sunk costs to enter, while incumbents disregard these costs in deciding on continuation or exit. We apply this framework to study entry and competition in the local U.S. broadband markets from 1999 to 2003. Ignoring sunk costs generates unreasonable variation in firms' competitive conduct over time. This variation disappears when entry costs are allowed. Once the market has one to three incumbent firms, the fourth entrant has little effect on competitive conduct.

Keywords: Entry; Market; structure; Sunk; costs; Broadband; market (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (38)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167718710001384
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Does the fourth entrant make any difference? Entry and competition in the early U.S. broadband market (2011)
Working Paper: Does the Fourth Entrant Make Any Difference? Entry and Competition in the Early U.S. Broadband Market (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:29:y:2011:i:5:p:547-561

Access Statistics for this article

International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal

More articles in International Journal of Industrial Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().