Tracing the dynamics of competition: Evidence from company profits

This paper proposes a simple approach to analyzing pro¯t dynam- ics which allows for time-varying persistence of pro¯ts. The time se- ries model is a simple autoregressive process where the dynamics of the persistence parameter follow an autoregressive or random walk pro- cess. Using the longest time series available on pro¯ts for six US ¯rms (Archer-Daniels-Midland , Avon, Coca Cola, Johnson & Johnson, WHX Corporation andWrigley), we analyze the dynamics of pro¯t persistence for the second half of the twentieth century.