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Author:Arora, A.
Bokhari, F. A. S.
Title:Open versus closed firms and the dynamics of industry evolution
Journal:Journal of Industrial Economics
2007 : SEP, VOL. 55:3, p. 499-527
Index terms:entry conditions
evolutionary games
industries
prices
production planning
profit
standards
Language:eng
Abstract:This paper provides a model of industry evolution in which firms adopt proprietary standards (closed firms) or a common standard (open firm). Closed firms may gain multiple profits while open firms encounter lower entry barriers. Lower price is related to a lower probability to adopt closed entry, and below some price level open entry turns to more likely. Closed entrants face better chances of survival in the beginning, but when prices decrease below a threshold, the open entrants have a better survival. These dynamics can change the industry structure and result in deviation from the long run equilibrium.
SCIMA record nr: 266784
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