ABSTRACT
This chapter studies the characteristics of rivalry within an industry. It uses a first-order stochastic Markov process to model the mobility of customers across firms. Transition probabilities matrices are estimated for the Costa Rican banking industry in different periods, and they are used to study rivalry among banks and to explore the evolution of the industry's structure. The Costa Rican banking industry experienced interesting structural changes that make it a useful case study. Following the New Empirical Industrial Organization paradigm, the chapter stresses the importance of intra-industry studies as well as the need of studying rivalry in a way closer to the Austrian approach.
