Market size matters
By: Jeffrey R. Campbell, Hugo Hopenhayn.
Contributors: Hopenhayn, Hugo Andrés.
Series: Working paper series ;; WP-2003-12; Working paper series (Federal Reserve Bank of Chicago. Research Dept. : Online) ;; WP-2003-12.
Publisher: Federal Reserve Bank of Chicago
Published: 2003
Place of publication: [Chicago, Ill.]
Language: eng
Format: Electronic resource
Subjects: Industries -- Size.; Retail trade.
Description: "This paper empirically examines the effects of market size on producers' sizes in retail trade industries with many producers.  A robust prediction of oligopoly theory is that larger markets are more competitive and have lower price-cost markups.  Because producers in more competitive markets must sell more at a lower markup to recover their fixed costs, oligopoly theory implies that larger and more competitive markets have larger producers.  Our estimated market size effects indicate whether or not this prediction of oligopoly theory carries over to competition among many producers.   Our analysis uses observations from thirteen retail trade industries across 225 metropolitan statistical areas.  In most of the industries we examine, producers are larger in larger markets, even after controlling for differences between markets' demographic and factor prices.  This is the case whether we measure producers' sizes with their average sales or average employment.  Thus, our results indicate that increasing the number of competitors decreases markups for most of the industries we examine"--Federal Reserve Bank of Chicago web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 10/1/2004.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.