Endogenous Sunk Cost, Quality Competition and Welfare

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DOI: 10.4236/tel.2011.13018    5,621 Downloads   10,211 Views  

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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.

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G. Ford and M. Stern, "Endogenous Sunk Cost, Quality Competition and Welfare," Theoretical Economics Letters, Vol. 1 No. 3, 2011, pp. 88-90. doi: 10.4236/tel.2011.13018.

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