Entry, exit, and the determinants of market structure

Timothy Dunne, Shawn D. Klimek, Mark J. Roberts, Daniel Yi Xu

Research output: Contribution to journalArticlepeer-review

54 Scopus citations


This article estimates a dynamic, structural model of entry and exit for two US service industries: dentists and chiropractors. Entry costs faced by potential entrants, fixed costs faced by incumbent producers, and the toughness of short-run price competition are important determinants of long-run firm values, firm turnover, and market structure. In the dentist industry entry costs were subsidized in geographic markets designated as Health Professional Shortage Areas (HPSA) and the estimated mean entry cost is 11 percent lower in these markets. Using simulations, we find that entry cost subsidies are less expensive per additional firm than fixed cost subsidies.

Original languageEnglish (US)
Pages (from-to)462-487
Number of pages26
JournalRAND Journal of Economics
Issue number3
StatePublished - Sep 2013

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


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