Sunk Costs, Accommodation, and the Welfare Effects of Entry

John Nachbar, Bruce Petersen and Inhak Hwang

Journal of Industrial Economics, 1998, vol. 46, issue 3, 317-332

Abstract: Although economists usually support the unrestricted entry of firms into an industry, entry may lower social welfare if there are setup costs or if entrants have a cost disadvantage. We consider the welfare effects of entry within a standard Cournot model where some of an incumbent firm’s costs are sunk. We find that the range of parameter values over which entry can harm welfare declines monotonically in the fraction of cost that are sunk. Furthermore, the presence of even a small fraction of sunk costs often reverses an assessment that entry harms welfare.

Date: 1998
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://doi.org/10.1111/1467-6451.00074

Related works:
Working Paper: Sunk Costs, Accommodation, and the Welfare Effects of Entry (1997)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jindec:v:46:y:1998:i:3:p:317-332

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0022-1821

Access Statistics for this article

Journal of Industrial Economics is currently edited by Pierre Regibeau, Yeon-Koo Che, Kenneth Corts, Thomas Hubbard, Patrick Legros and Frank Verboven

More articles in Journal of Industrial Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().