Sunk costs, entry and clustering

Alexander Matros, Vladimir Smirnov and Andrew Wait

No 2021-11, Working Papers from University of Sydney, School of Economics

Abstract: We examine how differences in fi rm sunk entry costs affect both entry order and the potential for clustering in a triopoly preemption game. If the cost asymmetry between the fi rms is sufficiently large, the fi rms always enter in the order from the lowest to highest cost, whereas if fi rms are relatively symmetric, it is possible that the second-highest cost firm enters first. There is never clustering of entry when there is any difference in cost between the two most productively efficient firms. Lastly, when the cost asymmetry between fi rms is large, the leader's entry time in the triopoly is always earlier than it is in a duopoly.

Keywords: timing games; asymmetric firms; clustering; inefficient entry (search for similar items in EconPapers)
Date: 2021-11, Revised 2024-01
New Economics Papers: this item is included in nep-bec, nep-com, nep-gth, nep-ind, nep-mic, nep-reg and nep-sbm
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Journal Article: Sunk costs, entry and clustering (2024)
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