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

Mo Xiao, Peter F. Orazem

Research output: Contribution to journalArticle

19 Citations (Scopus)

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.

Original languageEnglish (US)
Pages (from-to)547-561
Number of pages15
JournalInternational Journal of Industrial Organization
Volume29
Issue number5
DOIs
StatePublished - Sep 2011

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Costs
Broadband
Sunk costs
Incumbents
Entry costs
Inference
Exit

Keywords

  • Broadband market
  • Entry
  • Market structure
  • Sunk costs

ASJC Scopus subject areas

  • Industrial and Manufacturing Engineering
  • Industrial relations
  • Strategy and Management
  • Aerospace Engineering

Cite this

Does the fourth entrant make any difference? Entry and competition in the early U.S. broadband market. / Xiao, Mo; Orazem, Peter F.

In: International Journal of Industrial Organization, Vol. 29, No. 5, 09.2011, p. 547-561.

Research output: Contribution to journalArticle

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