The Laws of the Marketplace and ROI Dynamics

A clear understanding of the factors that have a significant impact on profitability would be of considerable interest to a variety of people. There are, however, long-run steady-state factors that cause some businesses to be more profitable than others and shorter-run transitory factors that may, over a brief period, lead to substantial departures from normal profit levels. While long-run considerations are of paramount importance, there are times when shortrun factors dominate decision-making. Even when they do not, the potential impact of these transitory forces should not be ignored. Moreover, it may at the outset be difficult to distinguish short-run aberrations from shifts in the forces that determine the steadystate relations. Accordingly, a detailed examination of the dynamics of profitability should be quite useful to those who seek to have some control over its level and/or whose fortunes are in some way tied to its performance. Dynamic analysis may be viewed either from the perspective of period-to-period changes or in a disequilibrium context. Prior work of mine 5 followed