I'm not sure how to answer Pat's question. I confess that I do not understand what a "fixed cost function" is. Pat also suggests that my analysis is static. Opening the story to dynamic analysis makes my position stronger. During the late 19th century when this literature was at its peak, technical change was very rapid. Carnegie once had a factory torn down when it was only a few months old. Rapid technological change means that sunk costs are even more at risk. Pat wonders why rational entrepreneurs would be hesitant to invest in industries with such a cost structure. In a dynamic, competitive world, prices are likely to fall below marginal costs to future marginal costs that take advantage of new technology. A rational entrepreneur would invest if he or she thought they could get first mover advantages -- selling at far above marginal costs -- before others could move in. But in a very dynamic economy, such a window of opportunity may not be open long enough to recoup costs. Michael Perelman