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This paper presents characteristics of dynamic equilibria in a model of industry structure where one firm is dominant in the sense of taking into account how its rivals will react to its decisions. The model is consistent with observed stable differences in market shares, with the market share of the dominant firm declining slowly over time. The market share of the dominant firm was found to decrease when the elasticity of industry demand increased, and when adjustment costs increased relative to long-run unit cost. The issue of barriers to entry is also discussed.
Finn E. Kydland (Mon,) studied this question.