Abstract

http://ssrn.com/abstract=1521151
 
 

References (21)



 
 

Citations (2)



 


 



The Economics of 'Radiator Springs:' Industry Dynamics, Sunk Costs, and Spatial Demand Shifts


Jeffrey R. Campbell


Federal Reserve Bank of Chicago

Thomas N. Hubbard


Northwestern University - Department of Management & Strategy; National Bureau of Economic Research (NBER)

May 2016

FRB of Chicago Working Paper No. 2009-24

Abstract:     
Interstate highway openings were permanent, anticipated demand shocks that increased gasoline demand and sometimes shifted it spatially. We investigate supply responses to these demand shocks, using county-level observations of service station counts and employment and data on highway openings’ timing and locations. When the new highway was close to the old route, average producer size increased, beginning one year before it opened. If instead the interstate substantially displaced traffic, the number of producers increased, beginning only after it opened. These dynamics are consistent with Hotelling-style oligopolistic competition with free entry and sunk costs and inconsistent with textbook perfect competition.

Number of Pages in PDF File: 61

Keywords: Interstate Highway System, Entry, Exit, Preemption

JEL Classification: L11, L81


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Date posted: December 11, 2009  

Suggested Citation

Campbell, Jeffrey R. and Hubbard, Thomas N., The Economics of 'Radiator Springs:' Industry Dynamics, Sunk Costs, and Spatial Demand Shifts (May 2016). FRB of Chicago Working Paper No. 2009-24. Available at SSRN: http://ssrn.com/abstract=1521151 or http://dx.doi.org/10.2139/ssrn.1521151

Contact Information

Jeffrey R. Campbell (Contact Author)
Federal Reserve Bank of Chicago ( email )
230 South LaSalle Street
Chicago, IL 60604-1413
United States
312-322-6156 (Phone)
312-322-2357 (Fax)
HOME PAGE: http://www.nber.org/~jrc
Thomas N. Hubbard
Northwestern University - Department of Management & Strategy ( email )
Kellogg School of Management
2001 Sheridan Road
Evanston, IL 60208
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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