Who thinks about the competition? Managerial ability and strategic entry in US local telephone markets

Avi Goldfarb, Mo Xiao

Research output: Contribution to journalArticle

56 Scopus citations

Abstract

We examine US local telephone markets shortly after the Telecommunications Act of 1996. The data suggest that more experienced, better-educated managers tend to enter markets with fewer competitors. This motivates a structural econometric model based on behavioral game theory that allows heterogeneity in managers' ability to conjecture competitor behavior. We find that manager characteristics are key determinants in managerial ability. This estimate of ability predicts out-of-sample success. Also, the measured level of ability rises following a shakeout, suggesting that our behavioral assumptions may be most relevant early in the industry's life cycle.

Original languageEnglish (US)
Pages (from-to)3130-3161
Number of pages32
JournalAmerican Economic Review
Volume101
Issue number7
DOIs
StatePublished - Dec 1 2011

ASJC Scopus subject areas

  • Economics and Econometrics

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