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Exit, Sunk Costs and the Selection of Firms

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  • Garella, P-G
  • Richelle, Y

Abstract

This paper aims to identify the cost characteristics of existing firms whenever firms are playing an infinite horizon supergame. Recognizing that, with more than two firms, the problem of which firms exit is quite similar to a coalition formation one, we associate to this supergame a game in coalitional form and obtain a prediction on the firm which are the more likly to stay out of the market by using the concept of a stable coalition structure.

Suggested Citation

  • Garella, P-G & Richelle, Y, 1997. "Exit, Sunk Costs and the Selection of Firms," ASSET - Instituto De Economia Publica 154, ASSET (Association of Southern European Economic Theorists).
    • Handle: RePEc:fth:inecpu:154
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    References listed on IDEAS

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    1. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-1158, December.
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    5. Gul, Faruk, 1989. "Bargaining Foundations of Shapley Value," Econometrica, Econometric Society, vol. 57(1), pages 81-95, January.
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    7. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    8. Pankaj Ghemawat & Barry Nalebuff, 1990. "The Devolution of Declining Industries," The Quarterly Journal of Economics, Oxford University Press, vol. 105(1), pages 167-186.
    9. Bernheim, B. Douglas & Peleg, Bezalel & Whinston, Michael D., 1987. "Coalition-Proof Nash Equilibria I. Concepts," Journal of Economic Theory, Elsevier, vol. 42(1), pages 1-12, June.
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    Cited by:

    1. Gamal Atallah, 2006. "Opportunity Costs, Competition, and Firm Selection," International Economic Journal, Taylor & Francis Journals, vol. 20(4), pages 409-430.
    2. Elena Cefis & Cristina Bettinelli & Alex Coad & Orietta Marsili, 2022. "Understanding firm exit: a systematic literature review," Small Business Economics, Springer, vol. 59(2), pages 423-446, August.
    3. Gabszewicz, J.J. & Marini, M. & Tarola, O., 2015. "Alliance Formation in a Vertically Differentiated Market," LIDAM Discussion Papers CORE 2015030, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Gabszewicz, Jean J. & Marini, Marco A. & Tarola, Ornella, 2015. "Endogenous Mergers in Vertically Differentiated Markets," MPRA Paper 68318, University Library of Munich, Germany.

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    Keywords

    ECONOMETRICS;

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

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