Xiao, Mo; Orazem, Peter F. - In: International Journal of Industrial Organization 29 (2011) 5, pp. 547-561
We study the importance of sunk costs in determining entry conditions and inferences about firm conduct in an adapted Bresnahan and Reiss (1991, 1994) framework. In our framework, entrants incur sunk costs to enter, while incumbents disregard these costs in deciding on continuation or exit. We...