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On entry and exit in response to aggregate shocks

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  • Laura Piscitelli
  • Michael Grinfeld
  • Harbir Lamba
  • Rod Cross

Abstract

This note extends the Dixit-Pindyck analysis of investment, in the form of market entry and exit under sunk costs, to the case of heterogeneous sunk costs. The implication is that the market displays full hysteresis, in the form of remanence and dependence on the nondominated extremum values of the aggregate shocks experienced. These implications are illustrated by numerical simulations.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

Volume (Year): 6 (1999)
Issue (Month): 9 ()
Pages: 569-572

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Handle: RePEc:taf:apeclt:v:6:y:1999:i:9:p:569-572

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Cited by:
  1. Hughes Hallett, A. J. & Piscitelli, Laura, 2002. "Testing for hysteresis against nonlinear alternatives," Journal of Economic Dynamics and Control, Elsevier, vol. 27(2), pages 303-327, December.
  2. Ansgar Belke & Matthias Göcke & Laura Werner, 2014. "Hysteresis Effects in Economics – Different Methods for Describing Economic Path-dependence," Ruhr Economic Papers 0468, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  3. Rod Cross & Julia Darby & Jonathan Ireland & Laura Piscitelli, 1999. "Hysteresis and Unemployment: a Preliminary Investigation," Computing in Economics and Finance 1999 721, Society for Computational Economics.

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