Research on the Sunk Cost of Telecommunications Industry

摘要

When new technology and old one compete in the homogeneous services, excess competition of telecommunication industry tends to occur. The reason is incumbent why adopt a new technology when old one that has great sunk cost can exert its value? If entrant with new technology just serves in same market with incumbent, it is reasonable when incumbent design strategy to think over sunk cost, Sunk cost no only is an entry barrier, but also an exit barrier. For a rational incumbent, as long as sunk cost can has its value and can compete with entrant, why they invest in a new technology? Our framework and findings are analyzing strategic choice of incumbent when entrant entry. Afterward discussing how regulation agency make equilibrium price to cover sunk cost of incumbent and balance revenue of entrant. Ultimately walk out of the whirlpool of price war and safeguard healthy development of telecommunication industry.