What Fraction of a Capital Investment is Sunk Cost?

Marcus Asplund

No 68, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: In order to determine to what extent capital investments are sunk costs this study deals with salvage values of discarded metalworking machinery. Even though these assets are expected to be non-specific many of the discarded assets are scrapped rather than sold on second-hand markets. Econometric results suggests that firms can only expect to get back 20-50 percent of the initial price for a "new" machine once it is installed. The results also show differences in value-age profiles across firms, but give only weak support for the hypothesis that salvage values are particularly low in recessions.

Keywords: Sunk cost; second-hand market; salvage value; machine tools (search for similar items in EconPapers)
JEL-codes: C24 D24 (search for similar items in EconPapers)
Pages: 27 pages
Date: 1995-09, Revised 1999-09-24
New Economics Papers: this item is included in nep-ind and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in Journal of Industrial Economics, 2000, pages 287-304.

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Related works:
Journal Article: What Fraction of a Capital Investment is Sunk Costs? (2000)
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