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Sunk Costs, Profit Variability, and Turnover


  • Adelina Gschwandtner
  • Val E. Lambson


Dynamic competitive models of industry evolution suggest that firm profit will be more volatile, and turnover lower, in industries with higher sunk costs. These implications are consistent with empirical observation. (JEL L00) Copyright 2006, Oxford University Press.

Suggested Citation

  • Adelina Gschwandtner & Val E. Lambson, 2006. "Sunk Costs, Profit Variability, and Turnover," Economic Inquiry, Western Economic Association International, vol. 44(2), pages 367-373, April.
  • Handle: RePEc:oup:ecinqu:v:44:y:2006:i:2:p:367-373

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    References listed on IDEAS

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    Cited by:

    1. Werner Hölzl & Klaus S. Friesenbichler & Kerstin Hölzl, 2014. "Slight Reduction in Cash-Flow-to-Sales Ratio. Profitability of Austrian Manufacturing in 2013," WIFO Bulletin, WIFO, vol. 19(11), pages 110-120, November.
    2. Klaus S. Friesenbichler & Werner Hölzl & Kerstin Hölzl, 2015. "Cash Flow Rate Contracted. Earning Power of Austrian Manufacturers in 2014," WIFO Monatsberichte (monthly reports), WIFO, vol. 88(9), pages 719-729, September.
    3. Barseghyan, Levon & DiCecio, Riccardo, 2011. "Entry costs, industry structure, and cross-country income and TFP differences," Journal of Economic Theory, Elsevier, vol. 146(5), pages 1828-1851, September.
    4. Adelina Gschwandtner & Val E. Lambson, 2009. "Sunk Entry Costs, Sunk Depreciation costs, and Industry Dynamics," Vienna Economics Papers 0902, University of Vienna, Department of Economics.

    More about this item

    JEL classification:

    • L00 - Industrial Organization - - General - - - General


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