Consumer Inertia, Firm Growth and Industry Dynamics

21 Pages Posted: 23 Oct 2002

See all articles by Arthur Fishman

Arthur Fishman

Bar-Ilan University - Department of Economics

Rafael Rob

University of Pennsylvania - Department of Economics

Date Written: January 10, 2002

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.

Keywords: Consumer Inertia, Firm Growth, Industry Dynamics, R&D, Firm Size Distribution

Suggested Citation

Fishman, Arthur and Rob, Rafael, Consumer Inertia, Firm Growth and Industry Dynamics (January 10, 2002). PIER Working Paper No. 02-034, Available at SSRN: https://ssrn.com/abstract=335742 or http://dx.doi.org/10.2139/ssrn.335742

Arthur Fishman

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 52900
Israel
972-3-531-8366 (Phone)
972 3 535 3180 (Fax)

Rafael Rob (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States
215-898-6775 (Phone)
215-573-2057 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
160
Abstract Views
1,846
rank
204,626
PlumX Metrics