Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/85409
Authors: 
Petrakis, Emmanuel
Roy, Santanu
Year of Publication: 
1998
Series/Report no.: 
Tinbergen Institute Discussion Paper 98-011/1
Abstract: 
We demonstrate the possibility of shake-out of firms and emergence of inter-firmheterogeneity along the (socially optimal) dynamic equilibrium path of a competitive industry with freeentry and exit, even when there is no uncertainty and all firms are ex ante identical with perfectforesight. Atomistic firms with upward sloping marginal cost curves undertake investment in firm-specific cost reduction. They earn negative net profit in early periods, compensated later by strictlypositive net profits; no entry occurs after the initial time period. Some firms may exit before others evenwhile other firms earn positive net profit.
Subjects: 
Cost Reducing Investment
Industry Dynamics
Learning
Competitive Equilibrium
Shake Out
JEL: 
D41
D92
L11
O31
Document Type: 
Working Paper

Files in This Item:
File
Size
142.81 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.