Learning, diffusion and the industry life cycle
AbstractAn industry typically experiences initial mass entry and later shakeout of producers over its life cycle. It can be explained as a competitive equilibrium outcome driven by the dynamic interaction between technology progress and demand diffusion. When a new product is introduced, high-income consumers tend to adopt it first. Technology then improves with cumulative output and demand growth generates S-shaped diffusion as the product penetrates lower-income groups. Eventually fewer new adopters are available and the number of firms starts to decline. It is shown that faster technological learning, higher mean income or larger market size contributes to faster demand diffusion and earlier industry shakeout. Empirical studies on the US and UK television industries as well as ten other US industries confirm the theoretical findings. ; Alternate title: Income distribution, market size and the evolution of industry
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Federal Reserve Bank of Kansas City in its series Payments System Research Working Paper with number PSR WP 04-01.
Date of creation: 2006
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-10-21 (All new papers)
- NEP-ENT-2004-10-21 (Entrepreneurship)
- NEP-INO-2004-10-21 (Innovation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Zeira, Joseph, 1999.
"Informational overshooting, booms, and crashes,"
Journal of Monetary Economics,
Elsevier, vol. 43(1), pages 237-257, February.
- Kiminori Matsuyama, 2002.
"The Rise of Mass Consumption Societies,"
Journal of Political Economy,
University of Chicago Press, vol. 110(5), pages 1035-1070, October.
- Kiminori Matsuyama, 1999. "The Rise of Mass Consumption Societies," Discussion Papers 1289, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Kiminori Matsuyama, 2000. "The Rise of Mass Consumption Societies," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers 23, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, vol. 86(3), pages 562-83, June.
- Boyan Jovanovic & Peter L. Rousseau, 2002.
"Moore's Law and Learning-By-Doing,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 5(2), pages 346-375, April.
- Jovanovic, B. & MacDonald, G.M., 1992.
"The Life-Cycle of Competitive Industry,"
92-09, Rochester, Business - Financial Research and Policy Studies.
- Boyan Jovanovic & Glenn MacDonald, 1994. "The Life-Cycle of a Competitive Industry," NBER Working Papers 4441, National Bureau of Economic Research, Inc.
- Jovanovic, B. & MacDonald, G., 1993. "The Life Cycle of a Competitive Industry," Working Papers 93-34, C.V. Starr Center for Applied Economics, New York University.
- Diego Comin & Bart Hobijn, 2003.
"Cross-country technology adoption: making the theories face the facts,"
169, Federal Reserve Bank of New York.
- Comin, D. & Hobijn, B., 2004. "Cross-country technology adoption: making the theories face the facts," Journal of Monetary Economics, Elsevier, vol. 51(1), pages 39-83, January.
- Comin, D. & Hobijn, B., 2003. "Cross-Country Technology Adoption: Making the Theories Face the Facts," Working Papers 03-04, C.V. Starr Center for Applied Economics, New York University.
- Gort, Michael & Klepper, Steven, 1982. "Time Paths in the Diffusion of Product Innovations," Economic Journal, Royal Economic Society, vol. 92(367), pages 630-53, September.
- Steven Klepper & Elizabeth Graddy, 1990. "The Evolution of New Industries and the Determinants of Market Structure," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 27-44, Spring.
- Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
- Horvath, Michael & Schivardi, Fabiano & Woywode, Michael, 2001. "On industry life-cycles: delay, entry, and shakeout in beer brewing," International Journal of Industrial Organization, Elsevier, vol. 19(7), pages 1023-1052, July.
- Hugo A. Hopenhayn, 1993. "The shakeout," Economics Working Papers 33, Department of Economics and Business, Universitat Pompeu Fabra.
- Utterback, James M. & Suarez, Fernando F., 1993. "Innovation, competition, and industry structure," Research Policy, Elsevier, vol. 22(1), pages 1-21, February.
- Steven Klepper & Kenneth L. Simons, 2000. "The Making of an Oligopoly: Firm Survival and Technological Change in the Evolution of the U.S. Tire Industry," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 728-760, August.
- Audretsch, David B, 1991. "New-Firm Survival and the Technological Regime," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 441-50, August.
- Dan Horsky, 1990. "A Diffusion Model Incorporating Product Benefits, Price, Income and Information," Marketing Science, INFORMS, vol. 9(4), pages 342-365.
- Gamal Atallah, 2009. "A Three-Period Analysis of R&D Spillovers in the Presence of an Industry Life Cycle Pattern," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 8(1), pages 21-35, April.
- Boyan Jovanovic & Chung-Yi Tse, 2006. "Creative Destruction in Industries," NBER Working Papers 12520, National Bureau of Economic Research, Inc.
- Ryo Horii, 2006.
"Wants and Past Knowledge: Growth Cycles with Emerging Industries,"
Discussion Papers in Economics and Business
06-03, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
- Horii, Ryo, 2012. "Wants and past knowledge: Growth cycles with emerging industries," Journal of Economic Dynamics and Control, Elsevier, vol. 36(2), pages 220-238.
- Ryo Horii, 2005. "Wants and Past Knowledge: Growth Cycles with Emerging Industries," Development and Comp Systems 0504007, EconWPA, revised 10 Jan 2006.
- Zhu Wang, 2006. "Technology Innovation and Market Turbulence: A Dotcom Example," 2006 Meeting Papers 508, Society for Economic Dynamics.
- Peter Thompson & Mihaela Pintea, 2008.
"Sorting, Selection, and Industry Shakeouts,"
Review of Industrial Organization,
Springer, vol. 33(1), pages 23-40, August.
- Zhu Wang, 2008. "Income Distribution, Market Size and the Evolution of Industry," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(3), pages 542-565, July.
- James McAndrews & Zhu Wang, 2007.
"Microfoundations of Two-sided Markets: The Payment Card Example,"
DNB Working Papers
128, Netherlands Central Bank, Research Department.
- James McAndrews & Zhu Wang, 2006. "Microfoundations of two-sided markets: the payment card example," Payments System Research Working Paper PSR WP 06-01, Federal Reserve Bank of Kansas City.
- Richard Sullivan & Zhu Wang, 2013.
"Internet banking: an exploration in technology diffusion and impact,"
13-10, Federal Reserve Bank of Richmond.
- Richard J. Sullivan & Zhu Wang, 2005. "Internet banking: an exploration in technology diffusion and impact," Payments System Research Working Paper PSR WP 05-05, Federal Reserve Bank of Kansas City.
- Zhu Wang, 2007.
"Technological Innovation and Market Turbulence: The Dot-com Experience,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 10(1), pages 78-105, January.
- Zhu Wang, 2005. "Technological innovation and market turbulence: the dot-com experience," Payments System Research Working Paper PSR WP 05-02, Federal Reserve Bank of Kansas City.
- Zhu Wang, 2008. "Market structure and credit card pricing: what drives the interchange?," Payments System Research Working Paper PSR WP 06-04, Federal Reserve Bank of Kansas City.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lu Dayrit).
If references are entirely missing, you can add them using this form.