Sunk Costs, Market Contestability, and the Size Distribution of Firms
This paper offers a new economic explanation for the observed inter-industry differences in the size distribution of firms. The empirical estimates--based on three temporal (1982, 1987, and 1992) cross-sections of the four-digit United States manuf...
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| Format: | Policy Research Working Paper |
| Language: | English |
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2012
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| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110118154720 http://hdl.handle.net/10986/3312 |
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okr-10986-33122021-04-23T14:02:08Z Sunk Costs, Market Contestability, and the Size Distribution of Firms Kessides, Ioannis N. Tang, Li ACCOUNTING ACCOUNTING STANDARD ADVERTISING AVERAGE COSTS BARRIER TO ENTRY BARRIERS TO ENTRY BENCHMARK BUSINESS ECONOMICS CAPITAL INVESTMENTS CAPITAL STRUCTURE COLLUSION CONSUMER GOODS CONSUMERS CONTESTABILITY CONTESTABLE MARKETS DEVELOPMENT BANK DEVELOPMENT POLICY DURABLE ECONOMETRIC ANALYSIS ECONOMETRICS ECONOMIC PERFORMANCE ELASTICITY ENTRY BARRIER ENTRY BARRIERS EQUATIONS EQUIPMENT EXPENDITURE EXPENDITURES HIGH LEVELS INDUSTRIAL ECONOMICS INTANGIBLE INTERNATIONAL BANK INVESTING LEVY MARKET CONCENTRATION MARKET EXIT MARKET FORCES MARKET POWER MARKET SHARE MARKET SHARES MARKET STRUCTURE MERGERS PERFECT COMPETITION POLITICAL ECONOMY RANDOM WALK REGULATORY REGIMES RESERVES SALE SALES SHARE OF INVESTMENT SMALL BUSINESS STRUCTURAL CHANGE SUNK COSTS TAX TAX TREATMENT VALUABLE KNOWLEDGE VOLATILITY WORLD MARKETS This paper offers a new economic explanation for the observed inter-industry differences in the size distribution of firms. The empirical estimates--based on three temporal (1982, 1987, and 1992) cross-sections of the four-digit United States manufacturing industries--indicate that increased market contestability, as signified by low sunk costs, tends to reduce the dispersion of firm sizes. These findings provide support for one of the key predictions of the theory of contestable markets: that market forces under contestability would tend to render any inefficient organization of the industry unsustainable and, consequently, tighten the distribution of firms around the optimum. 2012-03-19T18:00:05Z 2012-03-19T18:00:05Z 2011-01-01 http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110118154720 http://hdl.handle.net/10986/3312 English Policy Research working paper ; no. WPS 5540 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Publications & Research :: Policy Research Working Paper The World Region The World Region |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
ACCOUNTING ACCOUNTING STANDARD ADVERTISING AVERAGE COSTS BARRIER TO ENTRY BARRIERS TO ENTRY BENCHMARK BUSINESS ECONOMICS CAPITAL INVESTMENTS CAPITAL STRUCTURE COLLUSION CONSUMER GOODS CONSUMERS CONTESTABILITY CONTESTABLE MARKETS DEVELOPMENT BANK DEVELOPMENT POLICY DURABLE ECONOMETRIC ANALYSIS ECONOMETRICS ECONOMIC PERFORMANCE ELASTICITY ENTRY BARRIER ENTRY BARRIERS EQUATIONS EQUIPMENT EXPENDITURE EXPENDITURES HIGH LEVELS INDUSTRIAL ECONOMICS INTANGIBLE INTERNATIONAL BANK INVESTING LEVY MARKET CONCENTRATION MARKET EXIT MARKET FORCES MARKET POWER MARKET SHARE MARKET SHARES MARKET STRUCTURE MERGERS PERFECT COMPETITION POLITICAL ECONOMY RANDOM WALK REGULATORY REGIMES RESERVES SALE SALES SHARE OF INVESTMENT SMALL BUSINESS STRUCTURAL CHANGE SUNK COSTS TAX TAX TREATMENT VALUABLE KNOWLEDGE VOLATILITY WORLD MARKETS |
| spellingShingle |
ACCOUNTING ACCOUNTING STANDARD ADVERTISING AVERAGE COSTS BARRIER TO ENTRY BARRIERS TO ENTRY BENCHMARK BUSINESS ECONOMICS CAPITAL INVESTMENTS CAPITAL STRUCTURE COLLUSION CONSUMER GOODS CONSUMERS CONTESTABILITY CONTESTABLE MARKETS DEVELOPMENT BANK DEVELOPMENT POLICY DURABLE ECONOMETRIC ANALYSIS ECONOMETRICS ECONOMIC PERFORMANCE ELASTICITY ENTRY BARRIER ENTRY BARRIERS EQUATIONS EQUIPMENT EXPENDITURE EXPENDITURES HIGH LEVELS INDUSTRIAL ECONOMICS INTANGIBLE INTERNATIONAL BANK INVESTING LEVY MARKET CONCENTRATION MARKET EXIT MARKET FORCES MARKET POWER MARKET SHARE MARKET SHARES MARKET STRUCTURE MERGERS PERFECT COMPETITION POLITICAL ECONOMY RANDOM WALK REGULATORY REGIMES RESERVES SALE SALES SHARE OF INVESTMENT SMALL BUSINESS STRUCTURAL CHANGE SUNK COSTS TAX TAX TREATMENT VALUABLE KNOWLEDGE VOLATILITY WORLD MARKETS Kessides, Ioannis N. Tang, Li Sunk Costs, Market Contestability, and the Size Distribution of Firms |
| geographic_facet |
The World Region The World Region |
| relation |
Policy Research working paper ; no. WPS 5540 |
| description |
This paper offers a new economic
explanation for the observed inter-industry differences in
the size distribution of firms. The empirical
estimates--based on three temporal (1982, 1987, and 1992)
cross-sections of the four-digit United States manufacturing
industries--indicate that increased market contestability,
as signified by low sunk costs, tends to reduce the
dispersion of firm sizes. These findings provide support for
one of the key predictions of the theory of contestable
markets: that market forces under contestability would tend
to render any inefficient organization of the industry
unsustainable and, consequently, tighten the distribution of
firms around the optimum. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Kessides, Ioannis N. Tang, Li |
| author_facet |
Kessides, Ioannis N. Tang, Li |
| author_sort |
Kessides, Ioannis N. |
| title |
Sunk Costs, Market Contestability, and the Size Distribution of Firms |
| title_short |
Sunk Costs, Market Contestability, and the Size Distribution of Firms |
| title_full |
Sunk Costs, Market Contestability, and the Size Distribution of Firms |
| title_fullStr |
Sunk Costs, Market Contestability, and the Size Distribution of Firms |
| title_full_unstemmed |
Sunk Costs, Market Contestability, and the Size Distribution of Firms |
| title_sort |
sunk costs, market contestability, and the size distribution of firms |
| publishDate |
2012 |
| url |
http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110118154720 http://hdl.handle.net/10986/3312 |
| _version_ |
1764386778127532032 |