Endogenous Sunk Cost, Scale Economies, and Market Concentration

Yuichiro Matsumoto ()
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Yuichiro Matsumoto: Osaka University

No 18-20, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This paper offers a theoretical explanation of the recent sales concentration in the U.S. economy. The model is based on in-house R&D, which is involved in scale economies. An R&D subsidy helps the expansion of larger firms and allows them to take higher markups. Thus, it induces a concentrated market structure.

Keywords: Endogenous Sunk Cost; Firm Size Distribution; Heterogenous Firms; Markup; Quality Upgrading (search for similar items in EconPapers)
JEL-codes: D61 L11 L13 L16 O3 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2018-07
New Economics Papers: this item is included in nep-com
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