Are Sutton's predictions robust?: empirical insights into advertising, R&D, and concentration

Article Abstract:

John Sutton's 'Sunk Costs and Market Structure: Price Competition, Advertising, and the Evolution of Concentration' has been described as masterful and innovative for its robust predictions from strategic entry theory. Most of Sutton's robust predictions were supported when these were tested based on exogenous and endogenous sunk cost markets. Exogenous sunk cost markets were found to have lower minimum values of concentration than endogenous sunk cost markets while increasing market size reduces concentration's lower bound faster in exogenous sunk cost markets.

Market Research, Forecasts and trends, Markets (Economics), Authorship, Business economics, Managerial economics, Bibliography, Sutton, John

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Investor Preference for Large Firms: New Evidence on Economies of Size

Article Abstract:

Stock market data is used to study the relationship between capital market returns, risk, and firm size. Large firms have a capital raising advantage. Investors value the earnings of large firms over small frims contributing to a higher cost of equity for small firms.

Evaluation, Measurement, Beliefs, opinions and attitudes, Industrial organization, Industry, Industries, Capitalists and financiers

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Advertising and Economies of Scale: Critical Comments on the Evidence

Article Abstract:

Economies of scale in advertising are examined and found to be nonexistent. No evidence is developed to implicate advertising as a contributory factor in large size firms' efficiency. No relationship is developed between advertising and prices.

Advertising, Economies of scale

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