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Sunk Costs and Real Options in Antitrust
Social Science Research Network
Sunk costs play a central role in antitrust economics, but are often misunderstood and mismeasured. I will try to clarify some of the conceptual and empirical issues related to sunk costs, and explain their implications for antitrust analysis. I will be particularly concerned with the role of uncertainty. When market conditions evolve unpredictably (as they almost always do), firms incur an opportunity cost when they invest in new capital, because they give up the option to wait for the arrivaldoi:10.2139/ssrn.742505 fatcat:4pn4mry64reipjqhhq53fbttda