Firm numbers first rise, and then fall as the typical industry evolves. This nonmonotonicity in the number of producers is explained in this paper using a competitive model in which innovation opportunities induce firms to enter, but in which a firm's failure to implement new technology causes...

We provide a model that links the high return to venture equity to the impatience of the VCs. VCs are scarce, and hence, they have market power and a high return on their investments. As a result, VCs are eager to terminate non-performing ventures so they can move on to new ones. The scarcity of...

This paper models the product cycle and explains how it relates to world inequality. In the model, both phenomena arise because skilled people have a comparative advantage in making high-tech products. The model can explain up to a 10:1 income differential between people and up to a 7:1...

When a production process requires two extremely complementary inputs, conventional wisdom holds that a firm would always upgrade them simultaneously. We show, however, that if upgrading each input involves a fixed cost, the firm may upgrade them at different dates, "asynchronously." This...