TY - BOOK ID - 133754862 TI - Sunk costs, market contestability, and the size distribution of firms AU - Kessides, Ioannis N. AU - Tang, Li PY - 2011 PB - Washington, D.C., The World Bank, DB - UniCat KW - Access to Markets KW - Affiliated organizations KW - Debt Markets KW - Economic performance KW - Economic reform KW - Economic Theory & Research KW - Industry KW - Market access KW - Markets and Market Access KW - Multinational firms KW - Water and Industry UR - https://www.unicat.be/uniCat?func=search&query=sysid:133754862 AB - This paper offers a new economic explanation for the observed inter-industry differences in the size distribution of firms. The empirical estimates-based on three temporal (1982, 1987, and 1992) cross-sections of the four-digit United States manufacturing industries-indicate that increased market contestability, as signified by low sunk costs, tends to reduce the dispersion of firm sizes. These findings provide support for one of the key predictions of the theory of contestable markets: that market forces under contestability would tend to render any inefficient organization of the industry unsustainable and, consequently, tighten the distribution of firms around the optimum. ER -