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Entry and exit behavior in the absence of sunk costs : evidence from a price comparison site
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Haynes, Michelle and Thompson, Steve (2013) Entry and exit behavior in the absence of sunk costs : evidence from a price comparison site. Review of Industrial Organization, 42 (1). pp. 1-23. doi:10.1007/s11151-012-9358-4 ISSN 0889-938X.
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Official URL: http://dx.doi.org/10.1007/s11151-012-9358-4
Abstract
This paper explores entry and exit at a price comparison site (PCS) where the sunk costs of participation are effectively zero. We first use an unbalanced panel of 295 products on NexTag.com to estimate an error correction model of net entry. Although the results support our characterization of the PCS as a zero sunk cost market in which potential sellers behave as Kirznerian entrepreneurs in responding to opportunities, it is clear the net entry flow involves participants with widely differing behavior. This is investigated by examining exit and re-entry decisions at the seller level, which reveal that size and reputation determine individual responses to market opportunities.
| Item Type: | Journal Article | ||||
|---|---|---|---|---|---|
| Divisions: | Faculty of Social Sciences > Warwick Business School | ||||
| Journal or Publication Title: | Review of Industrial Organization | ||||
| Publisher: | Springer New York LLC | ||||
| ISSN: | 0889-938X | ||||
| Official Date: | February 2013 | ||||
| Dates: |
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| Volume: | 42 | ||||
| Number: | 1 | ||||
| Page Range: | pp. 1-23 | ||||
| DOI: | 10.1007/s11151-012-9358-4 | ||||
| Status: | Peer Reviewed | ||||
| Publication Status: | Published | ||||
| Access rights to Published version: | Restricted or Subscription Access |
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