Sunk Costs and Antitrust Barriers to Entry
US antitrust policy takes as its objective consumer welfare, not total economic welfare. With that objective, Joe Bain's definition of entry barriers is more useful than George Stigler's or definitions based on economic welfare. It follows that economies of scale that involve sunk costs may create antitrust barriers to entry. A simple model shows that sunk costs without scale economies may discourage entry without creating an antitrust entry barrier.
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- Demsetz, Harold, 1982.
"Barriers to Entry,"
American Economic Review,
American Economic Association, vol. 72(1), pages 47-57, March.
- N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring.
- Dennis W. Carlton, 2004.
"Why Barriers to Entry are Barriers to Understanding,"
NBER Working Papers
10577, National Bureau of Economic Research, Inc.
- Dennis W. Carlton, 2004. "Why Barriers to Entry Are Barriers to Understanding," American Economic Review, American Economic Association, vol. 94(2), pages 466-470, May.
- Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, volume 1, number 5474, April.
- Preston R. Fee & Hugo M. Mialon & Michael A. Williams, 2004. "What Is a Barrier to Entry?," American Economic Review, American Economic Association, vol. 94(2), pages 461-465, May.
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