A Stochastic Analysis of the Size Distribution of Firms

Abstract In the first section of this paper, the probabilistic method of Markov is applied to the analysis of an industrial structure. The concept of dynamic equilibrium for a group of firms is introduced, and a technique for exploring the characteristics of this state is presented. The applicability of this method is then illustrated by using it to investigate trends with respect to the concentration and mobility of firms in the iron and steel industry in the United States. * The author is indebted for valuable comments to R. Caves and S. Sosnick, as well as to the referees.