We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Hysteresis and import penetration with decreasing sunk entry costs.
- Authors
Aray, Henry
- Abstract
This article proposes an extension of Dixit (Q J Econ 104(2):205-228, 1989a, J Polit Econ 97(3):620-638, 1989b) assuming that potential exporting firms benefit from the experience of nearby firms already settled in the foreign market, which allows the sunk entry costs to diminish. The numerical results show that hysteresis (an effect that persists after the cause that brought it about has been removed) is lower than in Dixit's case. More interestingly, hysteresis is not monotonically increasing with the number of firms. Moreover, decreasing sunk entry costs have a stronger impact on entering than exiting a foreign market. Regarding the market share, exchange rate depreciations hide the positive effect of decreasing sunk entry costs. In contrast, this positive effect dampens the negative effect of exchange rate appreciations.
- Subjects
IMPORTS; CORPORATE profits; HYSTERESIS (Economics); MARKET share; FOREIGN exchange rates
- Publication
International Economics & Economic Policy, 2015, Vol 12, Issue 2, p175
- ISSN
1612-4804
- Publication type
Article
- DOI
10.1007/s10368-014-0269-8