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Submarkets, Shakeouts and Industry Life-Cycle

Author

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  • Jian Tong

Abstract

Some recent empirical findings suggest that there are intrinsic links between the statistical regularities regarding cohort survival patterns, the persistence of firm turnover, and shakeout during an industry life-cycle. This paper presents a theoretical model which explains these regularities and the links between them. I begin the analysis by treating the market as comprising a number of strategically independent submarkets, so that I can separate the strategic interaction effect at the submarket level and the independence effects which operate across these independent submarkets at the aggregate level. The analysis reveals that within each submarket a 'selection process' in in quality competition induces market concentration over time, and this leads to a certain shakeout pattern at the disaggregate level. The study also finds that the dynamics of the emergence of submarkets in a conventionally defined industry plays a crucial role in shaping the aggregate pattern of the industry life-cycle.

Suggested Citation

  • Jian Tong, 2000. "Submarkets, Shakeouts and Industry Life-Cycle," STICERD - Economics of Industry Papers 26, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    • Handle: RePEc:cep:stieip:26
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    File URL: https://sticerd.lse.ac.uk/dps/ei/EI26.pdf
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    Cited by:

    1. John Sutton, 2001. "Rich Trades, Scarce Capabilities: Industrial Development Revisited," STICERD - Economics of Industry Papers 28, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.

    More about this item

    Keywords

    Industry life-cycle; industrial growth; submarkets; shake-outs;
    All these keywords.

    JEL classification:

    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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