【Brownbag】Sunk Cost and Entrant's Choice of Capacity

  • 研討會日期 : 2024-04-12
  • 時間 : 12:10
  • 主講人 : Professor Joonkyo Hong (洪俊教)
  • 地點 : Conference Room B110
  • 演講者簡介 : Professor Joonkyo Hong received his Ph.D. in Economics from Pennsylvania State University in 2023. He is currently an Assistant Professor at the National Taiwan University. His research interests are Empirical Industrial Organization and Applied Microeconomics.
  • 演講摘要 : I develop a dynamic model of strategic entry to study how the structure of sunk entry costs influences the entrant's scale decision and the long-run market outcomes. Contrary to the typical dynamic entry model, my model features that the structure of sunk costs shapes not the number of competitors but also the industry's scale distribution. I empirically assess this channel using a case study of a land-use deregulatory reform in the South Korean cinema chain industry. The deregulation is estimated to act as an entry subsidy, particularly appealing to larger-scale theaters. However, the industry suffers a 5.6 percent loss of discounted net profits due to intensified competition and increased expenses on fixed operating costs. The resulting implicit cost of the regulatory action is not uncovered by the typical model, as it obscures the shift in the distribution toward a larger scale.
  • Register for participation : Link