Sunk Entry Costs, Sunk Depreciation costs, and Industry Dynamics
AbstractDynamic competitive models of industry evolution predict higher variability of firm value over time and lower variability of firm activity over time in industries where sunk entry costs are higher. These predictions have done well empirically. Here we extend the theory to allow an additional category of sunk costs---depreciation---and argue that this generates countervailing effects. We test this assertion empirically and find the results are consistent with the theory.
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Bibliographic InfoPaper provided by University of Vienna, Department of Economics in its series Vienna Economics Papers with number 0902.
Date of creation: Mar 2009
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Find related papers by JEL classification:
- L00 - Industrial Organization - - General - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-04-25 (All new papers)
- NEP-BEC-2009-04-25 (Business Economics)
- NEP-COM-2009-04-25 (Industrial Competition)
- NEP-IND-2009-04-25 (Industrial Organization)
- NEP-MIC-2009-04-25 (Microeconomics)
- NEP-TID-2009-04-25 (Technology & Industrial Dynamics)
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1704, Harvard - Institute of Economic Research.
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- repec:att:wimass:8904 is not listed on IDEAS
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