Learning, diffusion and the industry life cycle
An industry typically experiences initial mass entry and later shakeout of producers over its life cycle. It can be explained as a competitive equilibrium outcome driven by the dynamic interaction between technology progress and demand diffusion. When a new product is introduced, high-income consumers tend to adopt it first. Technology then improves with cumulative output and demand growth generates S-shaped diffusion as the product penetrates lower-income groups. Eventually fewer new adopters are available and the number of firms starts to decline. It is shown that faster technological learning, higher mean income or larger market size contributes to faster demand diffusion and earlier industry shakeout. Empirical studies on the US and UK television industries as well as ten other US industries confirm the theoretical findings. ; Alternate title: Income distribution, market size and the evolution of industry
|Date of creation:||2006|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (816) 881-2254
Web page: http://www.kansascityfed.org/
More information through EDIRC
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Hugo A. Hopenhayn, 1993. "The shakeout," Economics Working Papers 33, Department of Economics and Business, Universitat Pompeu Fabra.
- Utterback, James M. & Suarez, Fernando F., 1993. "Innovation, competition, and industry structure," Research Policy, Elsevier, vol. 22(1), pages 1-21, February.
- Zeira, Joseph, 1999.
"Informational overshooting, booms, and crashes,"
Journal of Monetary Economics,
Elsevier, vol. 43(1), pages 237-257, February.
- Jovanovic, B. & MacDonald, G.M., 1992.
"The Life-Cycle of Competitive Industry,"
92-09, Rochester, Business - Financial Research and Policy Studies.
- 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.
- Boyan Jovanovic & Glenn MacDonald, 1993. "The Life-Cycle of a Competitive Industry," NBER Working Papers 4441, National Bureau of Economic Research, Inc.
- Kiminori Matsuyama, 2002.
"The Rise of Mass Consumption Societies,"
Journal of Political Economy,
University of Chicago Press, vol. 110(5), pages 1035-1070, October.
- Kiminori Matsuyama, 2000. "The rise of mass consumption societies," LSE Research Online Documents on Economics 6656, London School of Economics and Political Science, LSE Library.
- Kiminori Matsuyama, 1999. "The Rise of Mass Consumption Societies," Discussion Papers 1289, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Kiminori Matsuyama, 2000. "The Rise of Mass Consumption Societies," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers 23, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Boyan Jovanovic & Peter L. Rousseau, 2002.
"Moore's Law and Learning-By-Doing,"
NBER Working Papers
8762, National Bureau of Economic Research, Inc.
- Comin, D. & Hobijn, B., 2004.
"Cross-country technology adoption: making the theories face the facts,"
Journal of Monetary Economics,
Elsevier, vol. 51(1), pages 39-83, January.
- Diego Comin & Bart Hobijn, 2003. "Cross-country technology adoption: making the theories face the facts," Staff Reports 169, Federal Reserve Bank of New York.
- Comin, D. & Hobijn, B., 2003. "Cross-Country Technology Adoption: Making the Theories Face the Facts," Working Papers 03-04, C.V. Starr Center for Applied Economics, New York University.
- Dan Horsky, 1990. "A Diffusion Model Incorporating Product Benefits, Price, Income and Information," Marketing Science, INFORMS, vol. 9(4), pages 342-365.
- Audretsch, David B, 1991. "New-Firm Survival and the Technological Regime," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 441-50, August.
- Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
- Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, vol. 86(3), pages 562-83, June.
- Horvath, Michael & Schivardi, Fabiano & Woywode, Michael, 2001. "On industry life-cycles: delay, entry, and shakeout in beer brewing," International Journal of Industrial Organization, Elsevier, vol. 19(7), pages 1023-1052, July.
- Steven Klepper & Kenneth L. Simons, 2000. "The Making of an Oligopoly: Firm Survival and Technological Change in the Evolution of the U.S. Tire Industry," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 728-760, August.
- Gort, Michael & Klepper, Steven, 1982. "Time Paths in the Diffusion of Product Innovations," Economic Journal, Royal Economic Society, vol. 92(367), pages 630-53, September.
When requesting a correction, please mention this item's handle: RePEc:fip:fedkpw:psrwp04-01. 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: (Lu Dayrit)
If references are entirely missing, you can add them using this form.