What Fraction of a Capital Investment is Sunk Cost?
In order to determine to what extent capital investments are sunk costs this study deals with salvage values of discarded metalworking machinery. Even though these assets are expected to be non-specific many of the discarded assets are scrapped rather than sold on second-hand markets. Econometric results suggests that firms can only expect to get back 20-50 percent of the initial price for a "new" machine once it is installed. The results also show differences in value-age profiles across firms, but give only weak support for the hypothesis that salvage values are particularly low in recessions.
|Date of creation:||Sep 1995|
|Date of revision:||24 Sep 1999|
|Publication status:||Published in Journal of Industrial Economics, 2000, pages 287-304.|
|Contact details of provider:|| Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden|
Phone: +46-(0)8-736 90 00
Fax: +46-(0)8-31 01 57
Web page: http://www.hhs.se/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
- Stephen D. Oliner, 1993. "New evidence on the retirement and depreciation of machine tools," Working Paper Series / Economic Activity Section 147, Board of Governors of the Federal Reserve System (U.S.).
- Shleifer, Andrei & Vishny, Robert W, 1992.
" Liquidation Values and Debt Capacity: A Market Equilibrium Approach,"
Journal of Finance,
American Finance Association, vol. 47(4), pages 1343-66, September.
- Shleifer, Andrei & Vishny, Robert W., 1992. "Liquidation Values and Debt Capacity: A Market Equilibrium Approach," Scholarly Articles 27692663, Harvard University Department of Economics.
- Ramey, Valerie A & SHAPIRO, MATTHEW D, 1998.
University of California at San Diego, Economics Working Paper Series
qt49k7n14z, Department of Economics, UC San Diego.
- Dixit, Avinash, 1979.
"The Role of Investment in Entry-Deterrence,"
The Warwick Economics Research Paper Series (TWERPS)
140, University of Warwick, Department of Economics.
- Prais, S J, 1986. "Some International Comparisons of the Age of the Machine-Stock," Journal of Industrial Economics, Wiley Blackwell, vol. 34(3), pages 261-77, March.
- Showalter, Mark H, 1994. "A Monte Carlo Investigation of the Box-Cox Model and a Nonlinear Least Squares Alternative," The Review of Economics and Statistics, MIT Press, vol. 76(3), pages 560-70, August.
- Heckman, James, 2013.
"Sample selection bias as a specification error,"
Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
- William J. Baumol & Robert D. Willig, 1981. "Fixed Costs, Sunk Costs, Entry Barriers, and Sustainability of Monopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 96(3), pages 405-431.
- B. Curtis Eaton & Richard G. Lipsey, 1980. "Exit Barriers are Entry Barriers: The Durability of Capital as a Barrier to Entry," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 721-729, Autumn.
- Oliner, Stephen D, 1996. "New Evidence on the Retirement and Depreciation of Machine Tools," Economic Inquiry, Western Economic Association International, vol. 34(1), pages 57-77, January.
- Kessides, Ioannis N, 1990. "Market Concentration, Contestability, and Sunk Costs," The Review of Economics and Statistics, MIT Press, vol. 72(4), pages 614-22, November.
When requesting a correction, please mention this item's handle: RePEc:hhs:hastef:0068. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Helena Lundin)
If references are entirely missing, you can add them using this form.