Markov-Perfect Industry Dynamics: A Framework for Empirical Work Export

@article{citeulike:206198, abstract = {This paper provides a model of firm and industry dynamics that allows for entry, exit and firm-specific uncertainty generating variability in the fortunes of firms. It focuses on the impact of uncertainty arising from investment in research and exploration-type processes. It analyses the behaviour of individual firms exploring profit opportunities in an evolving market place and derives optimal policies, including exit, in this environment. Then it adds an entry process and aggregates the optimal behaviour of all firms, including potential entrants, into a rational expectations, Markov-perfect industry equilibrium, and proves ergodicity of the equilibrium process. Numerical examples are used to illustrate the more detailed characteristics of the stochastic process generating industry structures that result from this equilibrium.}, author = {Ericson, Richard and Pakes, Ariel}, citeulike-article-id = {206198}, citeulike-linkout-0 = {http://dx.doi.org/10.2307/2297841}, citeulike-linkout-1 = {http://www.jstor.org/stable/2297841}, doi = {10.2307/2297841}, journal = {The Review of Economic Studies}, keywords = {450-3, empirical\_io}, number = {1}, pages = {53--82}, posted-at = {2005-05-20 20:20:32}, priority = {2}, title = {Markov-Perfect Industry Dynamics: A Framework for Empirical Work}, url = {http://dx.doi.org/10.2307/2297841}, volume = {62}, year = {1995} }

TY - JOUR ID - citeulike:206198 L3 - citeulike-article-id:206198 N2 - This paper provides a model of firm and industry dynamics that allows for entry, exit and firm-specific uncertainty generating variability in the fortunes of firms. It focuses on the impact of uncertainty arising from investment in research and exploration-type processes. It analyses the behaviour of individual firms exploring profit opportunities in an evolving market place and derives optimal policies, including exit, in this environment. Then it adds an entry process and aggregates the optimal behaviour of all firms, including potential entrants, into a rational expectations, Markov-perfect industry equilibrium, and proves ergodicity of the equilibrium process. Numerical examples are used to illustrate the more detailed characteristics of the stochastic process generating industry structures that result from this equilibrium. IS - 1 JF - The Review of Economic Studies EP - 82 TI - Markov-Perfect Industry Dynamics: A Framework for Empirical Work VL - 62 SP - 53 KW - 450-3 KW - empirical_io AU - Ericson, Richard AU - Pakes, Ariel PY - 1995/// UR - http://dx.doi.org/10.2307/2297841 ER -