Market Contestability in the Presence of Sunk (Entry) Costs
AbstractThis article extends previous laboratory experimental research to examine the competitive discipline of contested markets with a "natural monopoly"-type cost structure where sunk costs are neither zero nor infinite. Several alternative conjectures as to how or whether sunk costs can weaken the discipline of contested markets are presented and interpreted in the context of the experimental design. Sunk costs are found to weaken the support for "strong" interpretations of the contestable markets hypothesis and thus yield a wide diversity of dynamic patterns of market performance. Yet the disciplining power of contestability remains impressive, with no indications of sustained monopoly pricing.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. 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.
Bibliographic InfoArticle provided by The RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 15 (1984)
Issue (Month): 1 (Spring)
Contact details of provider:
Web page: http://www.rje.org
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Steve Buchheit & Nick Feltovich, 2011.
"Experimental Evidence Of A Sunk‐Cost Paradox: A Study Of Pricing Behavior In Bertrand–Edgeworth Duopoly,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(2), pages 317-347, 05.
- Buchheit, Steve & Feltovich, Nick, 2010. "Experimental evidence of a sunk–cost paradox: a study of pricing behavior in Bertrand–Edgeworth duopoly," SIRE Discussion Papers 2010-124, Scottish Institute for Research in Economics (SIRE).
- Durham, Yvonne & McCabe, Kevin & Olson, Mark A. & Rassenti, Stephen & Smith, Vernon, 2004. "Oligopoly competition in fixed cost environments," International Journal of Industrial Organization, Elsevier, vol. 22(2), pages 147-162, February.
- Jim Engle-Warnick & Bradley J Ruffle, 2002.
"Buyer Countervailing Power versus Monopoly Power: Evidence from Experimental Posted-Offer Markets,"
Economics Series Working Papers
2002-W14, University of Oxford, Department of Economics.
- Jim Engle-Warnick & Bradley Ruffle, 2002. "Buyer Countervailing Power versus Monopoly Power: Evidence from Experimental Posted-Offer Markets," Economics Papers 2002-W14, Economics Group, Nuffield College, University of Oxford.
- Kritikos, Alexander & Bolle, Friedel, 2004. "Punishment as a public good. When should monopolists care about a consumer boycott?," Journal of Economic Psychology, Elsevier, vol. 25(3), pages 355-372, June.
- Kelly, Frank S., 1995. "Laboratory subjects as multiproduct monopoly firms: An experimental investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 27(3), pages 401-420, August.
- Duffy, John, 2006.
"Agent-Based Models and Human Subject Experiments,"
Handbook of Computational Economics,
in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 19, pages 949-1011
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.