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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. 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.
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  7. Costas Arkolakis, 2008. "Market Penetration Costs and the New Consumers Margin in International Trade," NBER Working Papers 14214, National Bureau of Economic Research, Inc.
  8. Richard Ericson & Ariel Pakes, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Oxford University Press, vol. 62(1), pages 53-82.
  9. Ulrich Doraszelski & Sarit Markovich, 2007. "Advertising dynamics and competitive advantage," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 557-592, 09.
  10. 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.
  11. 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.
  12. Jianqing Fan & Qiwei Yao, 1998. "Efficient estimation of conditional variance functions in stochastic regression," LSE Research Online Documents on Economics 6635, London School of Economics and Political Science, LSE Library.
  13. Gerard R. Butters, 1977. "Equilibrium Distributions of Sales and Advertising Prices," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 465-491.
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Cited by:

  1. Ana Fernandes & Heiwai Tang, 2014. "Learning to Export from Neighbors," Development Working Papers 370, Centro Studi Luca d'Agliano, University of Milano, revised 26 Jun 2014.
  2. 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.
  3. Dinlersoz, Emin M. & Yorukoglu, Mehmet, 2008. "Informative advertising by heterogeneous firms," Information Economics and Policy, Elsevier, vol. 20(2), pages 168-191, June.
  4. Allen Tran, 2013. "Customer Driven Establishment Dynamics and Allocative Efficiency," 2013 Meeting Papers 115, Society for Economic Dynamics.
  5. 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.

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