AbstractWhile a start-up firm waits for its sales to materialize, it is a "pre-producer". This waiting period represents a special kind of entry cost. This paper studies how such entry costs influence the several stages of an industry's life cycle. Assuming that the production hazard is rising in the initial stages of pre-production, industry equilibrium entails an eventual "shakeout" of pre-producers as they are squeezed out by the producers who drive industry price down. This seems to fit the experience of the early automobile industry and of the recent dot.com wave
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2004 Meeting Papers with number 91.
Date of creation: 2004
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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Exit; hazard rates; learning curves;
Other versions of this item:
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-08-02 (All new papers)
- NEP-DGE-2004-08-02 (Dynamic General Equilibrium)
- NEP-ENT-2004-08-02 (Entrepreneurship)
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