SUNK COSTS AND REGULATION IN THE US PESTICIDE INDUSTRY

This paper examines the impact of sunk costs and market demand on the number of innovative companies, the U.S. market share of foreign-based firms, and merger choice in the U.S. Pesticide Industry. Results are consistent with Sutton's (1991) view of sunk costs and market structur e in that rising endogenous sunk research costs and exogenous sunk pes ticide product regulation costs and declining demand negatively affect the number of firms in the industry, have a stronger negative impact on the number of smaller firms, and encourage foreign-based Firm expan sion. (C) 1998 Elsevier Science B.V.