By Andrew Benito
Competition is central to an understanding of the corporate sector. Such competitive forces are best viewed in the dynamic sense of how quickly high rates of profit are competed away by entry and the threat of entry, and how quickly less profitable companies that survive improve their financial health. If profits persist from one year to the next this indicates that competitive forces do not act especially swiftly in removing such abnormal returns.
Oscillate Wildly: asymmetries and persistence in company-level profitability