Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/87028
Authors: 
Fok, Dennis
van Stel, Andre
Burke, Andrew
Thurik, Roy
Year of Publication: 
2010
Series/Report no.: 
Tinbergen Institute Discussion Paper 10-012/3
Abstract: 
This paper conducts the first general equilibrium analysis of the role of entry, exit and profits in industry dynamics. The benefit of our model is twofold. First, to discriminate between entrants’ role of performing the entrepreneurial function of creating disequilibrium and the conventional equilibrating role of moving the industry to a new equilibrium. Second, to discriminate between three aspects of industry dynamics: the effect of entry and exit on market equilibrium, duration of disequilibrium and patterns of adjustment. Using a rich data set of the retail industry, we construct a dynamic simultaneous equilibrium model of profits, entry and exit. We find that indeed entrants play an entrepreneurial function causing long periods of disequilibrium after which a new equilibrium is attained. Moreover, we find ample support for the statement that disequilibrium is the essence of economic progress.
Subjects: 
entry
exit
profits
equilibrium
industrial dynamics
retailing
JEL: 
B50
J01
L00
L1
L26
Document Type: 
Working Paper

Files in This Item:
File
Size
258.91 kB





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