Explaining the shakeout process: a successive submarkets model
Explaining the shakeout process: a successive submarkets model
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.
industrial dynamics, diffusion of product innovation, submarkets, market definition, shakeout, barriers to survival
950-975
Tong, Jian
8109179b-ff1d-483e-9ee0-bf3f96cda71b
13 March 2009
Tong, Jian
8109179b-ff1d-483e-9ee0-bf3f96cda71b
Tong, Jian
(2009)
Explaining the shakeout process: a successive submarkets model.
Economic Journal, 119 (537), .
Abstract
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.
More information
Published date: 13 March 2009
Keywords:
industrial dynamics, diffusion of product innovation, submarkets, market definition, shakeout, barriers to survival
Organisations:
Economics
Identifiers
Local EPrints ID: 51803
URI: http://eprints.soton.ac.uk/id/eprint/51803
ISSN: 0013-0133
PURE UUID: 6746c64e-183e-41fb-9b7f-8632526aef33
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Date deposited: 02 Jul 2008
Last modified: 16 Mar 2024 03:25
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