TITLE:
Endogenous Sunk Cost, Quality Competition and Welfare
AUTHORS:
George S. Ford, Michael Stern
KEYWORDS:
Sunk Costs, Endogenous Sunk Costs, Quality Competition, Welfare, Market Structure
JOURNAL NAME:
Theoretical Economics Letters,
Vol.1 No.3,
November
3,
2011
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.