CHANGES IN CONCENTRATION, TURBULENCE, AND THE DYNAMICS OF MARKET SHARES

Most previous studies of the dynamics of industry structure, by emphas izing changes in concentration, conceal much of the nature of underlyi ng competitive processes. Here we employ a stochastic firm growth mode l, estimated on U.K. data of 1979-1986 for over 200 leading firms, to derive joint predictions about the stability of market shares and the change of concentration. We find that changes in the market shares of surviving firms are the dominant influence on concentration, which is typically fairly stable in spite of considerable market-share turbulen ce. Advertising plays a major role in the dynamics of market shares an d, therefore, affects both concentration and turbulence.