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Sunk Costs, Depreciation, and Industry Dynamics

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.

Identiferoai:union.ndltd.org:VIENNA/oai:epub.wu-wien.ac.at:3446
Date29 November 2012
CreatorsGschwandtner, Adelina, Lambson, Val E.
PublisherMIT Press
Source SetsWirtschaftsuniversität Wien
LanguageEnglish
Detected LanguageEnglish
TypeArticle, PeerReviewed
Formatapplication/pdf
Relationhttp://dx.doi.org/doi:10.1162/REST_a_00236, http://www.mitpressjournals.org/, http://epub.wu.ac.at/3446/

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