Sunk costs of physical capital and the form of enterprise: investor-owned firms, consumer cooperatives and public enterprises

Abstract

This article considers how the efficiency of organizational forms of enterprise can depend on the level of sunk costs of physical capital in relation to market size, informational asymmetry and the heterogeneity of firm owners.

Keywords:

• sunk cost
• investor-owned firm
• consumer cooperative
• public enterprise

JEL Classification:

• P12
• P13
• L32
• L94

Acknowledgements

The author thanks Tadasu Matsuo and Hikaru Ogawa for helpful comments. Special thanks are due to Mark Taylor and David Peel, the editors of the journal.

Notes

¹For the proofs of the lemmas and propositions in this article, refer to Mikami (2011), which is available upon request to the author.

²The surplus materializes by setting the supply price of the good at ν.

³ Equation 15(14) yields a function , which appears in Fig. 1. Note that for with , and .

⁴Since and is continuous in x, such an x _e exists.

⁵For a detailed discussion on this topic, refer to Mikami (2011), Section 4.