Testing for Endogenous Sunk Costs in the Retail Industry

Hernan Roman

MPRA Paper from University Library of Munich, Germany

Abstract: This paper uses data from retail industries in Chile to test Shaked and Sutton's (1987) hypothesis of endogenous sunk costs. I find that industries which are less likely to have endogenous sunk costs display a signicant negative relationship between market size and concentration. In contrast, in the supermarket industry, where investment in advertising is presumed to be more intense, the tests show that concentration does not vary with market size and is bounded away from zero.

Keywords: Endogenous Sunk costs; concentration (search for similar items in EconPapers)
JEL-codes: L11 L81 (search for similar items in EconPapers)
Date: 2010, Revised 2014
New Economics Papers: this item is included in nep-bec, nep-com and nep-mkt
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:67250

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