Tracing the Dynamics of Competition: Evidence from Company Profits

This article proposes a simple approach to analyzing profit dynamics, which allows
for time-varying persistence of profits. The time series model is a simple autoregressive process where the dynamics of the persistence parameter follow an autoregressive process. Using the longest time series available on profits for more
than a hundred U.S. firms, we find that there is ample evidence of time variation in the persistence parameter.