Psychological and experimental evidence, as well as a wealth of anecdotal examples, suggests that firms may confound fixed, sunk, and variable costs, leading to distorted pricing decisions. This article investigates the extent to which market forces and learning eventually eliminate these...

We prove an existence result for games with incomplete information with continuous type spaces under the assumption that players have atomic posteriors. This information structure is an extreme example of the failure of absolute continuity of information, hence our result complements the...

This paper provides an explanation for why the sunk cost bias persists among firms in a competitive environment in which rich learning possibilities are allowed. We envision firms that experiment with cost methodologies that are consistent with real-world accounting practices, including ones...