Creative Destruction in Industries∗
نویسندگان
چکیده
Industries where prices decline rapidly experience early ‘shakeouts’. Existing models of the shakeout do not explain this negative relation between price decline and time to shakeout. We set up a vintage-capital model that explains this relation, and we provide some evidence in support of the mechanism that we propose. The relation emerges naturally in a vintage-capital model in which shakeouts of firms accompany the replacement of capital, and in which a shakeout is the first replacement echo of the capital created when the industry is born. We fit the model to the Gort-Klepper (1982) data and to Agarwal’s (1998) update of those data.
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