Economic History: Antibiotics

Some time ago I wrote about a paper of mine (Hünermund et al., 2015) in which my coauthors and me develop a model to explain the occurrence of industry shakeouts. Shakeouts are a phenomenon which we encounter frequently in new industries. At one point in time, a large number of relatively small firms, previously operating in a market, becomes unsustainable. Within a short period of time a lot of firms exit and, eventually, the industry becomes dominated by a few large players. Our model explains this frequently observed pattern by technological factors that change over the lifespan of an industry. Cost advantages — because of more efficient production technologies — allow a few firm to take over and squeeze all others out of the market. Continue reading Economic History: Antibiotics