Competitive Profits in the Long Run
Profit rates differ across industries. Explanations have often relied on static models of imperfect competition. This paper develops a dynamic model of perfect competition to demonstrate that long-run average profit rates differ even across competitive industries when the effects of sunk costs on entry and exit are considered. The hypothesis that firms maximize their present expected values has few empirical implications for long-run average profit rates, but it does have implications for the behavior of variables over time; for example, industries with high variability in the number of firms should exhibit low variability in firm values. Copyright 1992 by The Review of Economic Studies Limited.
Volume (Year): 59 (1992)
Issue (Month): 1 (January)
|Contact details of provider:|| Web page: http://www.blackwellpublishing.com/journal.asp?ref=0034-6527|
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=0034-6527|
When requesting a correction, please mention this item's handle: RePEc:bla:restud:v:59:y:1992:i:1:p:125-42. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.