Consumer inertia, firm growth and industry dynamics

Arthur Fishman, Rafael Rob

Research output: Contribution to journalArticlepeer-review

22 Scopus citations

Abstract

We develop a model of firm size, based on the hypothesis that consumers are "locked in," because of search costs, with firms they have patronized in the past. As a consequence, older firms have a larger clientele and are able to extract higher profits. The equilibrium of this model yields: (i) A downward sloping density of firm sizes. (ii) Older firms are less likely to exit than younger firms. (iii) Larger firms spend more on R&D.

Original languageEnglish
Pages (from-to)24-38
Number of pages15
JournalJournal of Economic Theory
Volume109
Issue number1
DOIs
StatePublished - 1 Mar 2003

Keywords

  • Consumer inertia
  • Customer loyalty
  • Entry and exit
  • Firm growth
  • Firm size distribution
  • R&D
  • Search cost

Fingerprint

Dive into the research topics of 'Consumer inertia, firm growth and industry dynamics'. Together they form a unique fingerprint.

Cite this