Market entry delays and capital hysteresis impact economy's growth and prices.
Market entry and exit decisions are influenced by the perishable nature of marketing investments. Firms delay entering a market until conditions are very favorable, and delay exiting to avoid losing their marketing capital. This study creates a model to understand how random shocks affect capital formation in an economy with both production and marketing capital. The results show that entry costs, risk, and productivity impact the balance between marketing and productive capital, as well as the prices of goods and shares in the stock market.