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Journal Article

The Life Cycle of a Competitive Industry

Boyan Jovanovic and Glenn M. MacDonald
Journal of Political Economy
Vol. 102, No. 2 (Apr., 1994), pp. 322-347
Stable URL: http://www.jstor.org/stable/2138664
Page Count: 26
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
The Life Cycle of a Competitive Industry
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Abstract

Firm numbers first rise, then later fall, as an industry evolves. This nonmonotonicity is explained using a competitive model in which innovation opportunities fuel entry and relative failure to innovate prompts exit; equilibrium time paths for price and quantity also share features of the data. The model is estimated using data from the U.S. automobile tire industry, a particularly dramatic example of the nonmonotonicity in firm numbers.

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