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The Production Decisions of Large Competitors: Detecting Cost Advantages and Strategic Behavior in Restaurants

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  • Clarissa Yeap

Abstract

This paper evaluates firm profitability in the highly competitive restaurant industry by comparing variation in firm size and production decisions with variation in market size. In the Census microdata, I find that multi-unit firms operate a greater number of restaurants and larger individual restaurants in larger MSAs. They also increase production intensity by increasing production during operating hours, extending operating hours, increasing the volume of meals and non-meals output. These results are generally consistent with full capacity exploitation in efficient firms, rather than underutilization by firms seeking to limit rivalry through excess capacity or product proliferation.

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  • Clarissa Yeap, 2006. "The Production Decisions of Large Competitors: Detecting Cost Advantages and Strategic Behavior in Restaurants," Working Papers 06-19, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:06-19
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    File URL: https://www2.census.gov/ces/wp/2006/CES-WP-06-19.pdf
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    Cited by:

    1. Steven Berry & Joel Waldfogel, 2010. "Product Quality And Market Size," Journal of Industrial Economics, Wiley Blackwell, vol. 58(1), pages 1-31, March.

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