Exit, Sunk Costs and the Selection of Firms

Richelle, Yves ; Garella, Paolo (1995) Exit, Sunk Costs and the Selection of Firms. Bologna: Dipartimento di Scienze economiche DSE, p. 33. DOI 10.6092/unibo/amsacta/5112. In: Quaderni - Working Paper DSE (214). ISSN 2282-6483.
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Abstract

The paper analyzes the question of which cost characteristics are exhibited by the rms that exit an oligopolistic market when costs are asymmetric and firms can credibly be forced out by the remaining competitors. The main results are: (i) if reentry is impossible (due to the presence of large sunk costs), then the firm with the highest marginal cost function dtays in; if reentry is costless then the firm with the highest average cost exits. Consequenty sunk costs not only affect the number of firms in an industry, but they also enter the determination of the type of rms that resist predation.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Richelle, Yves
Garella, Paolo
Keywords
endogenous coalition formation, exit, sunk costs.
Subjects
ISSN
2282-6483
DOI
Deposit date
10 May 2016 07:59
Last modified
11 May 2016 07:35
URI

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