The Dynamics of Market Structure and Market Size in Two Health Services Industries

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

in Producer Dynamics

Published by University of Chicago Press

Published in print March 2009 | ISBN: 9780226172569
Published online February 2013 | e-ISBN: 9780226172576 | DOI:
The Dynamics of Market Structure and Market Size in Two Health Services Industries

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This chapter models the entry and exit flows in two medical services industries—dentists and chiropractors—using data for small geographic markets in the United States. The models show that the number of entering and exiting firms is a function of the market characteristics that influence current and future profits, the distribution of scrap values and entry costs, and the number of firms and potential entrants that are present. The significance of N and NPE as control variables in the regressions provides some support for the dynamic framework. The implication of the dynamic models is that entry flows, exit flows, and current market structure depend on current demand and cost conditions, and also on the history of participation decisions. As market size increases, the number of firms rises less than proportionally, firm average size increases, and average productivity in the market increases.

Keywords: dynamic models; entry flows; exit flows; market structure; market size; dentists; chiropractors

Chapter.  9571 words.  Illustrated.

Subjects: Microeconomics

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