IDEAS home Printed from
   My bibliography  Save this book chapter

The Effects of Uncertainty and Sunk Costs on Firms’ Decision-Making: Evidence from Net Entry, Industry Structure and Investment Dynamics

In: The Economics of Imperfect Markets


  • Vivek Ghosal

    (Georgia Institute of Technology)


This paper presents selected evidence on the impact of uncertainty and sunk costs on firms’ decisions related to entry and exit, and investment expenditures. Evidence from a large sample of US manufacturing industries shows that greater uncertainty about profits significantly lowers net entry as well as investment. The negative effects are most pronounced in industries that are dominated by small firms and have high sunk costs. We note some implications for policy related to antitrust, employment and economic stabilization.

Suggested Citation

  • Vivek Ghosal, 2010. "The Effects of Uncertainty and Sunk Costs on Firms’ Decision-Making: Evidence from Net Entry, Industry Structure and Investment Dynamics," Contributions to Economics, in: Giorgio Calcagnini & Enrico Saltari (ed.), The Economics of Imperfect Markets, chapter 0, pages 167-182, Springer.
  • Handle: RePEc:spr:conchp:978-3-7908-2131-4_9
    DOI: 10.1007/978-3-7908-2131-4_9

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Marco de Pinto & Laszlo Goerke, 2022. "Cost uncertainty in an oligopoly with endogenous entry," Bulletin of Economic Research, Wiley Blackwell, vol. 74(4), pages 927-948, October.
    2. Hanee Ryu & Hyejae Jung, 2021. "Impact of public R&D as market matures: Evidence from solar PV industry," Energy & Environment, , vol. 32(8), pages 1543-1558, December.


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:conchp:978-3-7908-2131-4_9. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.