Dynamic efficiency occurs over time and is strongly linked to the pace of innovation within a market and improvements in both the range of choice for consumers and also the performance / reliability / quality of products.

Dynamic efficiency gains are often to be see in monopolistic competition and oligopolistic competition - in the latter case, where there are sufficiently large number of scaled businesses to earn and re-invest supernormal profits and where there are also many smaller firms perhaps better able to be innovative in niches within an industry.