9423215 Riess This research will specify and estimate new empirical models of entry and exit. The proposed empirical models fit into a developing literature that explains the evolution of industrial concentration and its effect on interfirm competition. A long-run goal of this research is to address competition issues that arise in antitrust economics, industrial policy, and international trade. The proposed models distinguish between technological, demand, and strategic factors that affect entrants' willingness to compete with established firms. An important goal is to model the effect that product differentiation has on the extent of competitive entry. The research also addresses dynamic issues, including the role of sunk costs in the timing of entry and exit. The research will use unique data on the location and sales of new and used car dealers to test the models. The empirical analysis will illustrate the applicability of the proposed methods. The specific results will provide information about the role of dealer systems in promoting retail competition. As part of the proposal, the author will assemble new information on consumer search patterns and transactions prices. These data will permit desegregate studies of substitution patterns among overlapping brands and dealers. It also will provide useful information about how consumer behavior is influenced by market structure. ***
