Exit, Sunk Costs and the Selection of Firms

Richelle, Yves ; Garella, Paolo G. (1995) Exit, Sunk Costs and the Selection of Firms. DOI 10.6092/unibo/amsacta/803.
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Abstract

The paper analyzes the question of which cost characteristics are exhibited by the firms 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 firms that resist predation.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Richelle, Yves
Garella, Paolo G.
Keywords
endogenous coalition formation exit sunk costs
Subjects
DOI
Deposit date
17 Jun 2004
Last modified
17 Feb 2016 14:05
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