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Endogenous Sunk Cost, Scale Economies, and Market Concentration

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  • Yuichiro Matsumoto

    (Osaka University)

Abstract

This paper offers a theoretical explanation of the recent sales concentration in the U.S. economy. The model is based on in-house R&D, which is involved in scale economies. An R&D subsidy helps the expansion of larger firms and allows them to take higher markups. Thus, it induces a concentrated market structure.

Suggested Citation

  • Yuichiro Matsumoto, 2018. "Endogenous Sunk Cost, Scale Economies, and Market Concentration," Discussion Papers in Economics and Business 18-20, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:1820
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    File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/1820.pdf
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    More about this item

    Keywords

    Endogenous Sunk Cost; Firm Size Distribution; Heterogenous Firms; Markup; Quality Upgrading;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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