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Information and Industry Dynamics

Author Info

  • Emin M. Dinlersoz
  • Mehmet Yorukoglu

Abstract

This paper develops a model of industry dynamics where firms compete to acquire customers over time by disseminating information about themselves in the presence of random shocks to their efficiency. The properties of the model's stationary equilibrium are related to empirical regularities on firm and industry dynamics. As an application of the model, the effects of a decline in the cost of information dissemination on firm and industry dynamics are explored. (JEL D11, D83, L11, L81, M37)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.2.884
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 102 (2012)
Issue (Month): 2 (April)
Pages: 884-913

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Handle: RePEc:aea:aecrev:v:102:y:2012:i:2:p:884-913
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Find related papers by JEL classification:
  • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
  • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
  • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
  • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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  1. Eckard, E Woodrow, Jr, 1988. "Advertising, Concentration Changes, and Consumer Welfare," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 340-43, May.
  2. Stephen Davis & John Haltiwanger & Ron Jarmin & Javier Miranda, 2006. "Volatility and Dispersion in Business Growth Rates: Publicly Traded Versus Privately Held Firms," Working Papers 06-17, Center for Economic Studies, U.S. Census Bureau.
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  4. Costas Arkolakis, 2010. "Market Penetration Costs and the New Consumers Margin in International Trade," Journal of Political Economy, University of Chicago Press, vol. 118(6), pages 1151 - 1199.
  5. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2010. "Multiple-Product Firms and Product Switching," American Economic Review, American Economic Association, vol. 100(1), pages 70-97, March.
  6. Richard T. Carson & Yixiao Sun, 2007. "The Tobit model with a non-zero threshold," Econometrics Journal, Royal Economic Society, vol. 10(3), pages 488-502, November.
  7. Marcus Asplund & Volker Nocke, 2003. "Firm Turnover in Imperfectly Competitive Markets," PIER Working Paper Archive 03-010, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  8. F. Lotti & E. Santarelli & M. Vivarelli, 1999. "Does Gibrat’s Law Hold in the Case of Young, Small Firms?," Working Papers 361, Dipartimento Scienze Economiche, Universita' di Bologna.
  9. Beggs, Alan & Klemperer, Paul, 1990. "Multi-Period Competition with Switching Costs," CEPR Discussion Papers 436, C.E.P.R. Discussion Papers.
  10. Ulrich Doraszelski & Sarit Markovich, 2007. "Advertising dynamics and competitive advantage," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 557-592, 09.
  11. Fishman, Arthur & Rob, Rafael, 2003. "Consumer inertia, firm growth and industry dynamics," Journal of Economic Theory, Elsevier, vol. 109(1), pages 24-38, March.
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Cited by:

  1. Ana Fernandes & Heiwai Tang, 2014. "Learning to Export from Neighbors," CESifo Working Paper Series 4699, CESifo Group Munich.
  2. Emin M. Dinlersoz & Rubén Hernández-Murillo, 2005. "The diffusion of electronic business in the United States," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 11-34.
  3. Allen Tran, 2013. "Customer Driven Establishment Dynamics and Allocative Efficiency," 2013 Meeting Papers 115, Society for Economic Dynamics.
  4. Dinlersoz, Emin M. & Yorukoglu, Mehmet, 2008. "Informative advertising by heterogeneous firms," Information Economics and Policy, Elsevier, vol. 20(2), pages 168-191, June.
  5. Emin M. Dinlersoz & Rubén Hernández-Murillo, 2004. "The diffusion of electronic business in the U.S," Working Papers 2004-009, Federal Reserve Bank of St. Louis.

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