PT  - JOURNAL ARTICLE
AU  - Vestergaard, Niels
AU  - Jensen, Frank
AU  - Jørgensen, Henning P.
TI  - Sunk Cost and Entry-Exit Decisions under Individual Transferable Quotas: Why Industry Restructuring Is Delayed
AID  - 10.3368/le.81.3.363
DP  - 2005 Aug 01
TA  - Land Economics
PG  - 363--378
VI  - 81
IP  - 3
4099  - http://le.uwpress.org/content/81/3/363.short
4100  - http://le.uwpress.org/content/81/3/363.full
SO  - Land Econ2005 Aug 01; 81
AB  - The paper shows that explicit modelling of sunk cost and a firm’s entry-exit decision in a traditional deterministic investment model may give an explanation of the slow transition to the optimal fleet structure following the introduction of individual transferable quotas (ITQs). The analysis shows that the annual lease unit price of quota may be in a range where the long-run fleet structure will not be attainable at once. Over time, firms with zero gross investment as optimal behavior may leave the industry as the capital decays and over the transition period the optimal fleet structure prevails. (JEL Q22)