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The great industry gamble: market structure dynamics as a survival contest


Reference:

Tóth, Á., 2012. The great industry gamble: market structure dynamics as a survival contest. RAND Journal of Economics, 43 (2), pp. 348-367.

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    Official URL:

    http://dx.doi.org/ 10.1111/j.1756-2171.2012.00169.x

    Abstract

    Industry dynamics are studied as an endogenous tournament with infinite horizon and stochastic entry. In each period, firms' investments determine their probability of surviving into the next period. This generates a survival contest, which fuels market structure dynamics, while the evolution of market structure constantly redefines the contest. More concentrated markets endogenously generate less profit, rivals that are more difficult to outlive, and more entry. The unique steady state distribution exhibits ongoing turbulence, correlated exit and entry rates and shake-outs. The model's predictions fit empirical findings in markets where firms trade off profits for smaller risk of failure (e.g. banking).

    Details

    Item Type Articles
    CreatorsTóth, Á.
    DOI10.1111/j.1756-2171.2012.00169.x
    DepartmentsFaculty of Humanities & Social Sciences > Economics
    RefereedYes
    StatusPublished
    ID Code29033

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