TY - JOUR
AU - Hwang, Inhak
AB - Although economists usually support the unrestricted entry of firms into an industry, entry may lower social welfare if there are setup costs or if entrants have a cost disadvantage. We consider the welfare effects of entry within a standard Cournot model where some of an incumbent firm’s costs are sunk. We find that the range of parameter values over which entry can harm welfare declines monotonically in the fraction of cost that are sunk. Furthermore, the presence of even a small fraction of sunk costs often reverses an assessment that entry harms welfare.
TI - Sunk Costs, Accommodation, and the Welfare Effects of Entry
JF - The Journal of Industrial Economics
DO - 10.1111/1467-6451.00074
DA - 1998-09-01
UR - https://www.deepdyve.com/lp/wiley/sunk-costs-accommodation-and-the-welfare-effects-of-entry-f188h04Ib0
SP - 317
VL - 46
IS - 3
DP - DeepDyve
ER -