Opportunity Costs, Competition, and Firm Selection

Gamal Atallah

Industrial Organization from University Library of Munich, Germany

Abstract: The paper questions the standard economic assumptions that competing economic agents have identical reservation utility levels, and that when differences in opportunity costs exit, they can be conveniently represented by fixed costs. Opportunity costs are endogenized by linking them to current efficiency. The effect of this interchangeability of skills is studied in the context of the effect of entry on firm selection in a Cournot setting. It is found that inefficient firms are more likely to crowd out efficient ones when the relationship between current efficiency and opportunity costs is strong, and when the fixed costs of changing markets are high. Moreover, in the long run firms with intermediate cost levels are likely to induce the exit of low and high cost firms.

Keywords: Entry; Exit; Efficiency; Firm selection (search for similar items in EconPapers)
JEL-codes: D43 L13 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2002-08-05
New Economics Papers: this item is included in nep-ent and nep-mic
Note: Type of Document - PDF; prepared on PC; pages: 28; figures: included
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/io/papers/0207/0207005.pdf (application/pdf)

Related works:
Journal Article: Opportunity Costs, Competition, and Firm Selection (2006)
Working Paper: Opportunity Costs, Competition, and Firm Selection (2002)
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:wpa:wuwpio:0207005

Access Statistics for this paper

More papers in Industrial Organization from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).