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| Author: | Tong, J. |
| Title: | Explaining the shakeout process: A 'Successive Submarkets' model |
| Journal: | Economic Journal
2009 : APR, VOL. 119:537, p. 950-975 |
| Index terms: | investments industries manufacturing market entry market exit models USA |
| Language: | eng |
| Abstract: | In this study, contemporaneous exit and entry (hereafter as: e-and-e.) in a new industry is explained with a diffusion process (here as: d-p.) across submarkets. There is a re-interpretation of the shakeout process in some industries in a novel way. The industry is a set of initially inactive independent submarkets, and the timing of their activation is determined by an exogenous aggregate d-p. New entry is attracted by new submarket opening. However, the post-entry endogenous sunk investment requirement induced by innovations also forces much exit to follow entry. Hence, the aggregate market has overlapping e-and-e. and has a shakeout if the aggregate d-p. follows a typical S-shape. |
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