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Explaining the shakeout process: a successive submarkets model

Record type: Article

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.

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Citation

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

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: 17 Jul 2017 14:47

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