Date of this Version
The RAND Journal of Economics
I describe a model of entry with endogenous product-type choices. These choices are formalized as the outcomes of a game of incomplete information in which rivals' differentiated products have nonuniform competitive effects on profits. I estimate the model for location choices in the video retail industry using a nested fixed-point algorithm solution. The results imply significant returns to product differentiation. Simulations illustrate the tradeoff between demand and intensified competition and the extent to which markets with more scope for differentiation support greater entry.
This is the peer reviewed version of the following article: Katja Seim (2006), An empirical model of firm entry with endogenous product-type choices, The Rand Journal of Economics, 37 (3), 619 which has been published in final form at http://dx.doi.org/10.1111/j.1756-2171.2006.tb00034.x . This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving: http://olabout.wiley.com/WileyCDA/Section/id-820227.html#terms.
Seim, K. (2006). An Empirical Model of Firm Entry with Endogenous Product-Type Choices. The RAND Journal of Economics, 37 (3), 619-640. http://dx.doi.org/10.1111/j.1756-2171.2006.tb00034.x
Date Posted: 27 November 2017
This document has been peer reviewed.