Endogenous shakeouts

Jeremy Bertomeu

International Journal of Industrial Organization, 2009, vol. 27, issue 3, pages 435-440

Abstract: Most new industries feature a shakeout, i.e. a short burst of entry soon followed by rapid exit of most early entrants. Yet, the speed, magnitude and timing of shakeouts are somewhat puzzling from the perspective of conventional entry models. In this paper, we argue that shakeouts are likely to occur as a result of the stochastic dynamics of the entry process, when firms are uncertain about their competitors' decision to enter. We show that the magnitude of such "endogenous" shakeouts can be quite large and sudden, in particular in highly competitive industries or markets with low-investment cost, low impatience and high liquidation values.

Keywords: Shake-out; Sunk; cost; Strategic; uncertainty; Coordination (search for similar items in EconPapers)
Date: 2009

Downloads: (external link)
http://www.sciencedirect.com/science/article/B6V8P ... 40c1751bb1e55868c85f
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:eee:indorg:v:27:y:2009:i:3:p:435-440

Access Statistics for this article

International Journal of Industrial Organization is edited by P. Bajari, B. Caillaud and N. Gandal

More articles in International Journal of Industrial Organization from Elsevier
Series data maintained by Heidi Boesdal ().