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| Author: | Besanko, D. Doraszelski, U. |
| Title: | Capacity dynamics and endogenous asymmetries in firm size |
| Journal: | RAND Journal of Economics
2004 : SPRING, VOL. 35:1, p. 23-49 |
| Index terms: | Capacity Companies by size |
| Language: | eng |
| Abstract: | Empirical evidence suggests that there are substantial and persistent differences in the sizes of companies in most industries. This article proposes a dynamic model of capacity accumulation that is consistent with the observed facts. The model highlights the mode of product market competition and the extent of investment reversibility as key determinants of the size distribution of companies in an industry. Particularly, if companies compete in prices and the rate of depreciation is large, then the industry moves toward an outcome with one dominant company and one small company. |
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