Economics, Econometrics and Finance
8 years ago

New study reveals how firm entry shapes industry evolution and growth

Palgrave Macmillan UK eBooks
Entry Dynamics: Theory and Implications
Jati K. Sengupta

Paper Summary

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The article discusses how the entry and exit of firms impact industry growth. When new firms enter, industries grow, but decline when existing firms leave. Competition between new and existing firms is key. In a perfect competition model, new firms enter until excess profits are eliminated. If demand exceeds capacity, prices rise, leading to more entry or output expansion.