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Sunk Costs, Depreciation, and Industry Dynamics

Gschwandtner, Adelina and Lambson, Val E. (2012) Sunk Costs, Depreciation, and Industry Dynamics. The Review of Economics and Statistics, 94 (4). pp. 1059-1065. ISSN 0034-6535

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Two of the most robust results from dynamic competitive models of industrial organization suggest that higher sunk cost industries should exhibit (1) higher intertemporal variability in the market value of their firms, and (2) lower intertemporal variability in the size of their industries. These predictions have done well empirically. This paper argues on theoretical and empirical grounds that depreciation generates countervailing effects.

Item Type: Article
Additional Information: To see the final version of this paper please visit the publisher's website. Access to the published version may require a subscription. The original publication is available at www.mitpressjournals.org .
Keywords: sunk costs / depreciation / entry and exit / irreversible investment
Classification Codes: JEL L 000
Divisions: Departments > Finance, Accounting and Statistics
Version of the Document: Accepted for Publication
Variance from Published Version: None
Depositing User: Dissertation Administrator
Date Deposited: 29 Feb 2012 16:38
Last Modified: 11 Dec 2017 18:44
Related URLs:
URI: http://epub.wu.ac.at/id/eprint/3446


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