Quotation Gschwandtner, Adelina, Lambson, Val E.. 2007. Sunk Costs, Depreciation, and Industry Dynamics. Reseach Seminar Presentation, University of Vienna, 05.06.




Dynamic competitive models of industry evolution suggest that the variability of firm value over time should be higher and the variability of the number of firms over time should be lower in industries where sunk entry costs, the difference between the entry cost and the scrap value, are higher. These two predictions have done well empirically. Here we generalize the theory to allow an additional category of sunk costs, depreciation, and argue that these generate the opposite effects. We test these assertions using a newly constructed data set consisting of more than 150 US companies over a period longer than 50 years. The results are consistent with the theory.


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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Unpublished lecture
Language English
Title Sunk Costs, Depreciation, and Industry Dynamics
Event Reseach Seminar Presentation
Location University of Vienna
Date June 5, 2007


Gschwandtner, Adelina (Former researcher)
Lambson, Val E. (Brigham Young University, United States/USA)
Institute for Statistics and Mathematics IN (Details)
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