Sunk Costs, Market Contestability, and the Size Distribution of Firms
In this paper we offer a new economic explanation for the observed inter-industry differences in the size distribution of firms. Our empirical estimates based on three temporal (1982, 1987, and 1992) cross-sections of the four-digit US manufacturing industries indicate that increased market contesta...
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| Format: | Journal Article |
| Language: | EN |
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2012
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| Online Access: | http://hdl.handle.net/10986/4622 |
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okr-10986-46222021-04-23T14:02:18Z Sunk Costs, Market Contestability, and the Size Distribution of Firms Kessides, Ioannis N. Tang, Li Production, Pricing, and Market Structure Size Distribution of Firms L110 Industry Studies: Manufacturing: General L600 In this paper we offer a new economic explanation for the observed inter-industry differences in the size distribution of firms. Our empirical estimates based on three temporal (1982, 1987, and 1992) cross-sections of the four-digit US 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. 2012-03-30T07:28:52Z 2012-03-30T07:28:52Z 2010 Journal Article Review of Industrial Organization 0889938X http://hdl.handle.net/10986/4622 EN http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Journal Article United States |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
EN |
| topic |
Production, Pricing, and Market Structure Size Distribution of Firms L110 Industry Studies: Manufacturing: General L600 |
| spellingShingle |
Production, Pricing, and Market Structure Size Distribution of Firms L110 Industry Studies: Manufacturing: General L600 Kessides, Ioannis N. Tang, Li Sunk Costs, Market Contestability, and the Size Distribution of Firms |
| geographic_facet |
United States |
| relation |
http://creativecommons.org/licenses/by-nc-nd/3.0/igo |
| description |
In this paper we offer a new economic explanation for the observed inter-industry differences in the size distribution of firms. Our empirical estimates based on three temporal (1982, 1987, and 1992) cross-sections of the four-digit US 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 |
Journal Article |
| 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://hdl.handle.net/10986/4622 |
| _version_ |
1764392156272787456 |