| 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. |