This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Are Sunk Costs a Barrier to Entry?

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Luís M. B. Cabral
Thomas W. Ross

Additional information is available for the following registered author(s):

Abstract

"The received wisdom is that sunk costs create a barrier to entry-if entry fails, then the entrant, unable to recover sunk costs, incurs greater losses. In a strategic context where an incumbent may prey on the entrant, sunk entry costs have a countervailing effect: they may effectively commit the entrant to stay in the market. By providing the entrant with commitment power, sunk investments may soften the reactions of incumbents. The net effect may imply that entry is more profitable when sunk costs are greater." Copyright 2008 Blackwell Publishing.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.blackwell-synergy.com/servlet/useragent?func=synergy&synergyAction=showTOC&journalCode=jems&volume=17&issue=1&year=2008&part=null
File Format: text/html
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Publisher Info
Article provided by Blackwell Publishing in its journal Journal of Economics & Management Strategy.

Volume (Year): 17 (2008)
Issue (Month): 1 (03)
Pages: 97-112
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:bla:jemstr:v:17:y:2008:i:1:p:97-112

Contact details of provider:
Web page: http://www.kellogg.northwestern.edu/research/journals/JEMS/

Order Information:
Web: http://www.blackwellpublishing.com/journal.asp?ref=1058-6407&site=1

For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).

Related research
Keywords:

Other versions of this item:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Guillermo Caruana & Liran Einav, 2008. "A Theory of Endogenous Commitment," Review of Economic Studies, Blackwell Publishing, vol. 75(1), pages 99-116, 01. [Downloadable!] (restricted)
  2. Bolton, Patrick & Scharfstein, David S, 1990. "A Theory of Predation Based on Agency Problems in Financial Contracting," American Economic Review, American Economic Association, vol. 80(1), pages 93-106, March. [Downloadable!] (restricted)
  3. Daniel F. Spulber, 1989. "Regulation and Markets," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262192756.
  4. T.W. Ross, 2004. "Sunk Costs and the Entry Decision," Journal of Industry, Competition and Trade, Springer, vol. 4(2), pages 79-93, 06. [Downloadable!]
  5. A. Michael Spence, 1977. "Entry, Capacity, Investment and Oligopolistic Pricing," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 534-544, Autumn. [Downloadable!] (restricted)
  6. Lipman, Barton L. & Wang, Ruqu, 2000. "Switching Costs in Frequently Repeated Games," Journal of Economic Theory, Elsevier, vol. 93(2), pages 149-190, August. [Downloadable!] (restricted)
    Other versions:
  7. Kyle Bagwell & Garey Ramey, 1996. "Capacity, Entry, and Forward Induction," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 660-680, Winter. [Downloadable!] (restricted)
    Other versions:
  8. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, vol. 90(357), pages 95-106, March. [Downloadable!] (restricted)
    Other versions:
  9. Cabral, Luis M B & Riordan, Michael H, 1997. "The Learning Curve, Predation, Antitrust, and Welfare," Journal of Industrial Economics, Blackwell Publishing, vol. 45(2), pages 155-69, June. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Robert S. Pindyck, 2009. "Sunk Costs and Risk-Based Barriers to Entry," NBER Working Papers 14755, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Alex Bryson & Harald Dale-Olsen, 2008. "A Tale of Two Countries: Unions, Closures and Growth in Britain and Norway," CEP Discussion Papers dp0867, Centre for Economic Performance, LSE. [Downloadable!]
Statistics
Access and download statistics

Did you know? You can create your own reading lists on IDEAS.

This page was last updated on 2009-11-22.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.