  The key idea of this model is that firms are the result of an evolutionary
process. Based on demand and supply considerations the evolutionary model
presented here derives explicitly Gibrat's law of proportionate effects as the
result of the competition between products. Applying a preferential attachment
mechanism for firms the theory allows to establish the size distribution of
products and firms. Also established are the growth rate and price distribution
of consumer goods. Taking into account the characteristic property of human
activities to occur in bursts, the model allows also an explanation of the
size-variance relationship of the growth rate distribution of products and
firms. Further the product life cycle, the learning (experience) curve and the
market size in terms of the mean number of firms that can survive in a market
are derived. The model also suggests the existence of an invariant of a market
as the ratio of total profit to total revenue. The relationship between a
neo-classic and an evolutionary view of a market is discussed. The comparison
with empirical investigations suggests that the theory is able to describe the
main stylized facts concerning the size and growth of firms.
