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This paper presents a dynamic investment game in which firms that are initially identical develop assets which are specialized to different market segments. The model assumes there are increasing returns to investment in a segment, for example, due to word-of-mouth or learning curve effects. In equilibrium, firms that are only slightly different focus all of their investment in different segments, causing small random differences to expand into large permanent differences. Even though firms dodoi:10.2139/ssrn.1845983 fatcat:mqbiyn6evnbuvbpmyfzk4fscza