Entry, Sunk Costs, and Market Structure

W. Bentley Macleod ()

Canadian Journal of Economics, 1987, vol. 20, issue 1, 140-51

Abstract: Typically, models that study the role of sunk costs suppose that incumbent firms face entry by a single firm each period. In this paper, the set of equilibrium market structures that result when all firms are free to enter or exit and set prices each period are characterized. The effect of sunk costs on the market structure is examined and it is shown that sunk costs can take on various forms, each having a different effect on the set of equilibrium market structures. Costs that are sunk due to the existence of product- specific capital do not in general deter entry. Rather, entry deterrence is a necessary outcome only when costs are sunk due to the time it would take to leave the market.

Date: 1987
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://links.jstor.org/sici?sici=0008-4085%2819870 ... SCAMS%3E2.0.CO%3B2-5 (text/html)
only available to JSTOR subscribers

Related works:
Working Paper: Entry, Sunk Costs and Market Structure (1986)
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:cje:issued:v:20:y:1987:i:1:p:140-51

Ordering information: This journal article can be ordered from
https://www.economic ... ionen/membership.php

Access Statistics for this article

Canadian Journal of Economics is currently edited by Zhiqi Chen

More articles in Canadian Journal of Economics from Canadian Economics Association Canadian Economics Association Prof. Werrner Antweiler, Treasurer UBC Sauder School of Business 2053 Main Mall Vancouver, BC, V6T 1Z2. Contact information at EDIRC.
Bibliographic data for series maintained by Prof. Werner Antweiler ().