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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/29483
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| Title: | Who thinks about the competition? Managerial ability and strategic
entryin US local telephone markets |
| Authors: | Goldfarb, Avi - University of Toronto
Xiao, Mo - University of Arizona |
| Keywords: | entry games, behavioral industrial organization, cognitive hierarchy,
CLECs, local telephone competition |
| Issue Date: | 2008 |
| Series/Report no.: | Net Institute Working Paper;08-21 |
| Abstract: | This paper examines how manager and firm characteristics relate to entry
decisions in US local telephone markets. To do so, it develops a
structural econometric model that allows managers to be heterogeneous in
their ability to correctly conjecture competitor behavior. The model
adapts Camerer, Ho, and Chong's (2004) Cognitive Hierarchy model to a
real-world setting. We observe the industry in 1998, shortly after the
Telecommunications Act of 1996 opened up the market. We find that older
firms with older, more experienced managers have higher estimated levels
of strategic ability. Managers with degrees in economics or business,
and managers with graduate degrees, also have higher estimated levels of
strategic ability. We find no evidence that university quality is
related to ability. We repeat this exercise using data from 2000, 2002,
and 2004. While the core results do not change, the overall level of
measured strategic ability increases substantially by 2004. The
estimates of strategic ability are also correlated with survival: those
firms with lower estimated levels of ability are more likely to exit the
industry early. |
| URI: | http://hdl.handle.net/2451/29483 |
| Appears in Collections: | NET Institute Working Papers Series
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