Sunk Costs and Antitrust Barriers to Entry

13 Pages Posted: 23 Jan 2004  

Richard Schmalensee

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Date Written: January 2004

Abstract

US antitrust policy takes as its objective consumer welfare, not total economic welfare. With that objective, Joe Bain's definition of entry barriers is more useful than George Stigler's or definitions based on economic welfare. It follows that economies of scale that involve sunk costs may create antitrust barriers to entry. A simple model shows that sunk costs without scale economies may discourage entry without creating an antitrust entry barrier.

Keywords: antitrust, U.S. antitrust policy, entry barriers

Suggested Citation

Schmalensee, Richard, Sunk Costs and Antitrust Barriers to Entry (January 2004). MIT Sloan Working Paper No. 4457-04. Available at SSRN: https://ssrn.com/abstract=486944 or http://dx.doi.org/10.2139/ssrn.486944

Richard Schmalensee (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

Room E62-525
Cambridge, MA 02142
United States
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