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...

We present a model of industry evolution where the dynamics are driven by a process of endogenous innovations, followed by subsequent embodiments in physical capital. Traditionally, the only distinction between R&D and physical investment was one of labeling: the first process accumulates an...

We present a model of industry evolution where the dynamics are driven by a process of endogenous innovations, followed by subsequent embodiments in physical capital. Traditionally, the only distinction between R&D and physical investment was one of labeling: the first process accumulates an...