Abstract

In this paper, an empirical test of Sutton hypothesis (1991), for Italian manufacturing sectors, on the relation between concentration and market size, is performed. The model distinguishes sectors on the basis of the sunk costs type: endogenous sunk costs vs. exogenous sunk costs. According to Sutton, the sectors with endogenous sunk costs should show higher concentration as market size goes to infinite than sectors with exogenous sunk costs; for the first type of sectors it should also be present a break-down of the inverse relation between concentration and market size. Another hypothesis of Sutton is a quicker convergence towards low value of concentration for sectors with exogenous sunk costs. In this paper, these hypotheses are tested for Italy, using the four macrosectors as determined by Davies and Lyons (1996) and by Robinson and Chiang (1996).