{"id":9361,"date":"2022-07-27T07:02:58","date_gmt":"2022-07-27T07:02:58","guid":{"rendered":"https:\/\/depocen.org\/publications\/regulatory-versus-natural-endogenous-sunk-costs-observational-equivalence-in-rationalizing-lower-bounds-on-industry-concentration\/"},"modified":"2022-07-27T07:02:58","modified_gmt":"2022-07-27T07:02:58","slug":"regulatory-versus-natural-endogenous-sunk-costs-observational-equivalence-in-rationalizing-lower-bounds-on-industry-concentration","status":"publish","type":"publications","link":"https:\/\/depocen.org\/en\/publications\/regulatory-versus-natural-endogenous-sunk-costs-observational-equivalence-in-rationalizing-lower-bounds-on-industry-concentration\/","title":{"rendered":"Regulatory Versus Natural Endogenous Sunk Costs: Observational Equivalence In Rationalizing Lower Bounds On Industry Concentration"},"content":{"rendered":"<p>We propose a theory of `regulatory endogenous sunk costs&#8217;<br \/>\n(RESC), in which a captured regulator raises minimum quality<br \/>\nstandards when market size increases in order to protect incumbent<br \/>\n\frms. Our RESC theory&#8217;s predictions that market size is unrelated to<br \/>\nindustry concentration and positively related to product quality are<br \/>\nobservationally equivalent to those of Sutton&#8217;s theory of `natural<br \/>\nendogenous sunk costs&#8217; (NESC), in which incumbents increase quality<br \/>\ninvestments to compete for a share of a growing market. The NESC<br \/>\ntheory suggests that, with higher entry costs, incumbents jockey for<br \/>\nincreased market shares by increasing quality investments. The RESC<br \/>\ntheory, however, predicts that product quality should be lower with<br \/>\nhigher entry costs. Entry costs and minimum quality standards each<br \/>\nprovide incumbents with protection from pro\ft erosions that entry<br \/>\notherwise would produce. A key implication of our analysis is the<br \/>\npossibility that some industries might be misclassi\fed as natural<br \/>\noligopolies. We provide a few examples of candidate RESC industries.<\/p>\n","protected":false},"featured_media":0,"template":"","cate_publications":[],"author_publications":[1779,1781,1996,1997],"topic_publications":[],"class_list":["post-9361","publications","type-publications","status-publish","hentry","author_publications-pham-hoang-van","author_publications-pham-hoang-van-en","author_publications-david-d-vanhoose","author_publications-david-d-vanhoose-en"],"acf":[],"_links":{"self":[{"href":"https:\/\/depocen.org\/en\/wp-json\/wp\/v2\/publications\/9361","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/depocen.org\/en\/wp-json\/wp\/v2\/publications"}],"about":[{"href":"https:\/\/depocen.org\/en\/wp-json\/wp\/v2\/types\/publications"}],"wp:attachment":[{"href":"https:\/\/depocen.org\/en\/wp-json\/wp\/v2\/media?parent=9361"}],"wp:term":[{"taxonomy":"cate_publications","embeddable":true,"href":"https:\/\/depocen.org\/en\/wp-json\/wp\/v2\/cate_publications?post=9361"},{"taxonomy":"author_publications","embeddable":true,"href":"https:\/\/depocen.org\/en\/wp-json\/wp\/v2\/author_publications?post=9361"},{"taxonomy":"topic_publications","embeddable":true,"href":"https:\/\/depocen.org\/en\/wp-json\/wp\/v2\/topic_publications?post=9361"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}