Industry dynamics with stochastic demand

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalNot applicablepeer-review

1 Scopus Citations
View graph of relations

Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)41-68
Journal / PublicationRAND Journal of Economics
Volume39
Issue number1
Early online date16 Sep 2008
Publication statusPublished - 2008
Externally publishedYes

Abstract

We study the dynamics of an industry subject to aggregate demand shocks -where the productivity of a firm's technology evolves stochastically over time. To characterize the intertemporal evolution of the distribution of firms, we discuss in particular how exit decisions, aggregate output, profits, and distributions of firm productivities vary (a) across different demand realization paths; (b) along a demand history path, detailing the effects of continued good or bad market conditions; and (c) for different anticipated future market conditions. We show how poor demand conditions can lead to increased exit of low-productivity firms at all future dates and states and raise welfare due to the impact on exit decisions.

Citation Format(s)

Industry dynamics with stochastic demand. / Bergin, James; Bernhardt, Dan.

In: RAND Journal of Economics, Vol. 39, No. 1, 2008, p. 41-68.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalNot applicablepeer-review