Entry and Competition in Concentrated Markets

This paper proposes an empirical framework for measuring the effects of entry in concentrated markets. Building on models of entry in atomistically competitive markets, we show how the number of producers in an oligopolistic market varies with changes in demand and market competition. These analytical results structure our empirical analysis of competition in five retail and professional industries. Using data on geographically isolated oligopolies, we find that almost all variation in competitive conduct occurs in monopolies and duopolies. By the time the market has three firms, entry has little additional effect on competitive conduct.