Firm turnover in imperfectly competitive markets.
This paper is motivated by the empirical regularity that industries differ greatly in the level of firm turnover and that entry and exit rates are positively correlated across industries. Our objective is to investigate the effect of fixed costs and, in particular, market size on entry and exit rates and hence on the age distribution of firms. We analyse a stochastic dynamic model of a monopolistically competitive industry. Each firm's efficiency is assumed to follow a Markov process. We show...Expand abstract
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