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.
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.
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.
- Durham, Yvonne & McCabe, Kevin & Olson, Mark A. & Rassenti, Stephen & Smith, Vernon, 2004. "Oligopoly competition in fixed cost environments," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 22(2), pages 147-162, February.
- Jim Engle-Warnick & Bradley Ruffle, 2002.
"Buyer Countervailing Power versus Monopoly Power: Evidence from Experimental Posted-Offer Markets,"
Economics Papers, Economics Group, Nuffield College, University of Oxford
2002-W14, Economics Group, Nuffield College, University of Oxford.
- Jim Engle-Warnick & Bradley J Ruffle, 2002. "Buyer Countervailing Power versus Monopoly Power: Evidence from Experimental Posted-Offer Markets," Economics Series Working Papers, University of Oxford, Department of Economics 2002-W14, University of Oxford, Department of Economics.
- Kritikos, Alexander & Bolle, Friedel, 2004. "Punishment as a public good. When should monopolists care about a consumer boycott?," Journal of Economic Psychology, Elsevier, Elsevier, vol. 25(3), pages 355-372, June.
- John Duffy, 2004.
"Agent-Based Models and Human Subject Experiments,"
Computational Economics, EconWPA
- Buchheit, Steve & Feltovich, Nick, 2010.
"Experimental evidence of a sunk–cost paradox: a study of pricing behavior in Bertrand–Edgeworth duopoly,"
SIRE Discussion Papers, Scottish Institute for Research in Economics (SIRE)
2010-124, Scottish Institute for Research in Economics (SIRE).
- 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, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(2), pages 317-347, 05.
- Utteeyo Dasgupta, 2009.
"Potential competition in the presence of sunk entry costs: an experiment,"
New Zealand Economic Papers, Taylor & Francis Journals,
Taylor & Francis Journals, vol. 43(2), pages 203-225.
- Dasgupta, Utteeyo, 2009. "Potential Competition in the Presence of Sunk Entry Costs: An Experiment," MPRA Paper 21945, University Library of Munich, Germany.
- Kelly, Frank S., 1995. "Laboratory subjects as multiproduct monopoly firms: An experimental investigation," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 27(3), pages 401-420, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.