Endogenous Sunk Cost, Quality Competition and Welfare

George S. Ford, Michael Stern

.

DOI: 10.4236/tel.[phone]                

Abstract

Competition in quality with escalating levels of endogenous sunk costs may produce levels of concentration even higher than expected in their absence. We show that consumers may very well benefit from such expenditures despite the effects on concentration and likely attenuation of price competition.

Keywords

Sunk Costs, Endogenous Sunk Costs, Quality Competition, Welfare, Market Structure

Conflicts of Interest

The authors declare no conflicts of interest.

References

[1]	J. Sutton, “Sunk Cost and Market Structure,” MIT Press, Cambridge, 1991.