The causes and consequences of over entry: Modeling and empirical testing

Brian Charles Becker, University of Pennsylvania

Abstract

In many industries, there is a repeated tendency for over entry (over building) which ultimately leads to some industry shakeout (exit). In some large fixed costs industries, shakeout is too costly leading some incumbent firms to "wait" for industry demand to increase as the entry rate of new firms subsides. The particular focus of this study will be explaining the causes and results of over entry brought about by an announced positive demand shock (a new development in the market that increases demand) in an industry that is otherwise characterized by relatively constant demand growth. Models are developed to describe over entry both as the result of demand uncertainty and firm behavior. To accomplish this, some concepts from the Industrial Organization and Strategic Management literature with some of the more behavioral (Decision Processes) literature are combined. These theoretical models were tested on data from the hotel markets of Philadelphia, Atlantic City, and Orlando.

Subject Area

Economics|Business costs|Economic theory

Recommended Citation

Becker, Brian Charles, "The causes and consequences of over entry: Modeling and empirical testing" (1993). Dissertations available from ProQuest. AAI9321354.
https://repository.upenn.edu/dissertations/AAI9321354

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