DD10.txt - what firms are able to stay in the market and what firms must leave the market Firms that earn a profit are able to continue operating Firms

DD10.txt - what firms are able to stay in the market and...

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what firms are able to stay in the market and what firms must leave the market. Firms that earn a profit are able to continue operating. Firms that are losing money will be forced to drop out of the market. The profit and loss mechanism therefore selects for firms who are making a profit. This might be due to the firm s decision-making or it might be due to luck (or some combination of the two). Nonetheless, the economist should be able to explain the success (or lack thereof) of firms. An economist can look at the characteristics and decisions shared by the surviving firms and contrast those characteristics and decisions of the firms that have left the market. In doing so, one can get the sense of the role of decision-making and luck as well as the types of decisions that have proven successful and unsuccessful. In my view, political economy would benefit from the same sort of approach. Rather than start with a baseline model to determine whether some policy is
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  • Fall '15
  • DR. Aimal

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