https://macropaperwarehouse.com/authors/andrea-chiavari/Andrea ChiavariHugo -- gohugo.ioen-ushttps://macropaperwarehouse.com/papers/customer-accumulation-returns-to-scale-and-secular-trends/https://macropaperwarehouse.com/papers/customer-accumulation-returns-to-scale-and-secular-trends/<p>This paper asks how rising returns to scale in production contributed to three concurrent U.S. secular trends since 1980: declining business dynamism, rising markups, and growing firm expenditures on customer acquisition. The author constructs a firm dynamics model in the Hopenhayn (1992) tradition with endogenous entry and exit, heterogeneous markups, and customer accumulation grounded in directed search in the product market. Firms compete for customers through both prices and selling activities; larger firms gain a competitive edge when returns to scale rise because their marginal costs fall more than those of smaller firms—even though the technological shift is uniform across firms. This demand-based channel triggers winners-and-losers dynamics and the rise of superstar firms.</p>