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| Author: | Nachbar, J. |
| Title: | Sunk costs, accomodation, and the welfare effects of entry |
| Journal: | Journal of Industrial Economics
1998 : SEP, VOL. 46:3, p. 317-332 |
| Index terms: | SUNK COSTS WELFARE ENTRY CONDITIONS |
| Language: | eng |
| Abstract: | 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. The authors consider the welfare effects of entry within a standard Cournot model where some of an incumbent firm's costs are sunk. The authors find that the range of parameter values over which entry can harm welfare declines monotonically in the fraction of cost that are sunk. |
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