Explaining the shakeout process: a successive submarkets model

Tong, Jian (2009) Explaining the shakeout process: a successive submarkets model. Economic Journal, 119, (537), 950-975.


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This paper explains contemporaneous exit and entry in a new industry with a diffusion process across submarkets. It allows a re-interpretation of the shakeout process in some industries in a novel way. The industry is a collection of initially inactive independent submarkets; the timing of their activation is determined by an exogenous aggregate diffusion process. New submarket opening attracts new entry. However, the post-entry endogenous sunk investment requirement induced by innovations also forces much exit to follow entry. The aggregate market thus has overlapping exit and entry; and has a shakeout if the aggregate diffusion process follows a typical S-shape.

Item Type: Article
ISSNs: 0013-0133 (electronic)
Related URLs:
Keywords: industrial dynamics, diffusion of product innovation, submarkets, market definition, shakeout, barriers to survival
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
Divisions : University Structure - Pre August 2011 > School of Social Sciences > Economics
ePrint ID: 51803
Accepted Date and Publication Date:
13 March 2009Published
Date Deposited: 02 Jul 2008
Last Modified: 31 Mar 2016 12:30
URI: http://eprints.soton.ac.uk/id/eprint/51803

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