Faculty Digital Archive

Archive@NYU >
NET Institute >
NET Institute Working Papers Series >

Please use this identifier to cite or link to this item: http://hdl.handle.net/2451/29483

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

Files in This Item:

File Description SizeFormat
Goldfarb_Xiao_08-21.pdf941.52 kBAdobe PDFView/Open

Items in Faculty Digital Archive are protected by copyright, with all rights reserved, unless otherwise indicated.

 

The contents of the FDA may be subject to copyright, be offered under a Creative Commons license, or be in the public domain.
Please check items for rights statements. For information about NYU’s copyright policy, see http://www.nyu.edu/footer/copyright-and-fair-use.html 
Valid XHTML 1.0 | CSS