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Working Paper
Entry, exit, and the determinants of market structure
Dunne, Timothy; Roberts, Mark J.; Klimek, Shawn D.; Xu, Daniel Yi (2013-10-01)
This paper estimates a dynamic, structural model of entry and exit in an oligopolistic industry and uses it to quantify the determinants of market structure and long-run firm values for two U.S. service industries, dentists and chiropractors. Entry costs faced by potential entrants, fixed costs faced by incumbent producers, and the toughness of short-run price competition are all found to be important determinants of long-run firm values, firm turnover, and market structure. Estimates for the dentist industry allow the entry cost to differ for geographic markets that were designated as Health ...
FRB Atlanta Working Paper , Paper 2013-10

Working Paper
Very Simple Markov-Perfect Industry Dynamics: Empirics
Tilly, Jan; Abbring, Jaap H.; Campbell, Jeffrey R.; Yang, Nan (2018-07-24)
This paper develops an econometric model of firm entry, competition, and exit in oligopolistic markets. The model has an essentially unique symmetric Markov-perfect equilibrium, which can be computed very quickly. We show that its primitives are identified from market-level data on the number of active firms and demand shifters, and we implement a nested fixed point procedure for its estimation. Estimates from County Business Patterns data on U.S. local cinema markets point to tough local competition. Sunk costs make the industry's transition following a permanent demand shock last 10 to 15 ...
Working Paper Series , Paper WP-2018-17

Working Paper
Firm-Level Pass-Through of Supply Chain Disruptions: Insights from the U.S. Beef Market
Scott, Francisco; Duarte, Marco; Ma, Meilin (2025-11-25)
We leverage a fire outbreak that caused a large but temporary capacity loss at the largest U.S. beef packer to study how firm conduct shapes the pass-through of supply disruptions along the supply chain. Despite evidence of industry-wide increases in processing costs, retail prices for the affected packer’s products fell. To rationalize this pattern, we develop a model of bilateral retailer-packer bargaining that accounts for reliability of product delivery. The model highlights how disruptions alter bargaining leverage and shift margins between buyer and seller. Counterfactual simulations ...
Research Working Paper , Paper RWP 25-20

Working Paper
Is Sales Tax Included in the Price? Consumer Inattention and Price Competition
Shy, Oz (2024-06-18)
Sales tax is generally not included in the advertised price quoted to consumers in the United States. In contrast, value added taxes (VAT) are embedded into the price in most other countries. This article investigates how the two different pricing structures and consumers' decision-making process affect the intensity of price competition. The two pricing structures yield identical market outcomes with fast-computing consumers who are willing and able to recompute the exact sales tax each time there is a price change. With slow-computing consumers, prices and profits are higher when sellers ...
FRB Atlanta Working Paper , Paper 2024-5

Discussion Paper
The Shadow Value of Central Bank Lending
Jankauskas, Tomas; Albertazzi, Ugo; Burlon, Lorenzo; Pavanini, Nicola (2025-10-16)
After the Great Financial Crisis, the European Central Bank (ECB) extended its monetary policy toolbox to include the use of long-term loans to banks at interest rates close to zero or even negative. These central bank interventions were aimed at supporting the transmission of expansionary monetary policy and likely played a crucial role in bolstering the financial stability of the euro area, namely by reducing the chance of bank runs. However, quantitative evidence on the effects of these interventions on financial stability remains scant. In this post, we quantify the effectiveness of ...
Liberty Street Economics , Paper 20251016

Working Paper
Oligopsonies over the Business Cycle
Pinheiro, Roberto; Monte, Daniel (2020-02-27)
With a duopsony model, we show how the degree of labor market slack relates to earnings inequality and firm size distribution across local labor markets and the business cycle. In booms, due to the high aggregate productivity, there is fierce competition with resulting high wages and full employment. During recessions, there is labor market slack and firms enjoy local market power. In periods in which the economy is moving in or out of a recession, there is an “accommodation” phase, with firms shrinking their labor forces and paying lower wages instead of competing for poached workers. We ...
Working Papers , Paper 20-06

Working Paper
Fixed Costs in the U.S. Banking System
Désiré, Thomas; Pandolfo, Jordan (2026-09-01)
Fixed costs account for an increasing share of operating expenses in the U.S. banking system. From 1995 to 2026, estimated fixed costs rose from 37 percent to 62 percent as a share of total noninterest expense. Over the same period, estimated marginal and average operating costs declined, loan spreads and net interest margins fell, and estimated loan markups increased by 21 percentage points. These trends are pervasive across banks but are most pronounced among large banks. We develop a model of bank industry dynamics with endogenous fixed costs to rationalize these long-run trends and ...
Research Working Paper , Paper RWP 26-12

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