The Production Decisions of Large Competitors: Detecting Cost Advantages and Strategic Behavior in Restaurants
July 2006
Working Paper Number:
CES-06-19
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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profitability,
market,
production,
sale,
produce,
establishment,
strategic,
profit,
revenue,
consumer,
profitable,
restaurant
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Census of Retail Trade,
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