Empirical Models of Industry Dynamics with Endogenous Market Structure

This article reviews recent developments in the study of industry dynamics, with a special emphasis on the econometric endogeneity of market structure. Endogeneity of market structure follows from the presence of serially correlated unobservable shocks to the profitability of firms' dynamic decisions, a feature common to many empirical settings. We particularly focus on extensions of standard two-step methods that leverage instrumental variables to address endogeneity, in both single-agent and oligopoly models