NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Michael J. Mazzeo

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Working Papers

July 2017When Demand Increases Cause Shakeouts
with Thomas N. Hubbard: w23639
Standard economic models that guide competition policy imply that demand increases should lead to more, not fewer firms. However, Sutton’s (1991) model illustrates that in some cases, demand increases can catalyze competitive responses that bring about shake-outs. This paper provides empirical evidence of this effect in the 1960s-1980s hotel and motel industry, an industry where quality competition increasingly took the form of whether firms supplied outdoor recreational amenities such as swimming pools. We find that openings of new Interstate Highways are associated with increases in hotel employment, but decreases in the number of firms, in local areas. We further find that while highway construction is associated with increases in hotel employment in both warm and cold places, it on...
June 2003Differentiation Strategy and Market Deregulation: Local Telecommunication Entry in the Late 1990s
with Shane Greenstein: w9761
The authors examine the role of differentiation strategies for entry behavior in markets for local telecommunication services in the late 1990s. Whereas the prior literature has used models of interaction among homogenous firms, this research is motivated by the claim of entrants that they differ substantially in their product offerings and business strategies. Exploiting a new, detailed data set of Competitive Local Exchange Carriers (CLECs) entry into over 700 U.S. cities, the authors take advantage of recent developments in the analysis of entry and competition among differentiated firms. They test and reject the null hypothesis of homogeneous competitors. They also find strong evidence that CLECs account for both potential market demand and the business strategies of competitors when m...

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