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The Life Cycle of a Competitive Industry

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  • Jovanovic, B.
  • MacDonald, G.

Abstract

Firm numbers first rise, then later fall, as an industry evolves. This nonmonotonicity is explained using a competitive model in which innovation opportunities fuel entry and relative failure to innovate prompts exit; equilibrium time paths for price and quantity also share features of the data. The model is estimated using data from the U.S. automobile tire industry, a particularly dramatic example of the nonmonotonicity in firm numbers. Copyright 1994 by University of Chicago Press.
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Suggested Citation

  • 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.
  • Handle: RePEc:cvs:starer:93-34
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    References listed on IDEAS

    as
    1. Jovanovic, Boyan & Lach, Saul, 1989. "Entry, Exit, and Diffusion with Learning by Doing," American Economic Review, American Economic Association, vol. 79(4), pages 690-699, September.
    2. Jovanovic, Boyan & MacDonald, Glenn M, 1994. "The Life Cycle of a Competitive Industry," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 322-347, April.
    3. 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.
    4. Gort, Michael & Klepper, Steven, 1982. "Time Paths in the Diffusion of Product Innovations," Economic Journal, Royal Economic Society, vol. 92(367), pages 630-653, September.
    5. A. M. Spence, 1981. "The Learning Curve and Competition," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 49-70, Spring.
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    More about this item

    Keywords

    competition;

    JEL classification:

    • L6 - Industrial Organization - - Industry Studies: Manufacturing

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