Sunk Costs and Antitrust Barriers to Entry
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4457-04.pdf
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190.2 KB
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Author(s)
Schmalensee, Richard
Date Issued
December 10, 2004
Series/Report no.
MIT Sloan School of Management Working Paper;4457-04
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.
Subjects
antitrust
U.S. antitrust policy
entry barriers
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