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Free Entry and Welfare with Different Firms

Author

Listed:
  • Francisco Galera

    (School of Economics and Business Administration, University of Navarra)

  • Isabel Rodríguez-Tejedo

    (School of Economics and Business Administration, University of Navarra)

  • Juan C. Molero

    (School of Economics and Business Administration, University of Navarra)

Abstract

It has been proved that in an homogeneous product industry, price over marginal costs, business stealing, set up costs and free entry imply excess entry from the welfare point of view. The proof assumes identical firms. We show by example that with non-identical firms, those conditions are compatible with insufficient entry. Besides, we provide a criterium to evaluate excess entry in industries with non-identical firms and externalities.

Suggested Citation

  • Francisco Galera & Isabel Rodríguez-Tejedo & Juan C. Molero, 2012. "Free Entry and Welfare with Different Firms," Faculty Working Papers 17/12, School of Economics and Business Administration, University of Navarra.
    • Handle: RePEc:una:unccee:wp1712
    as

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    File URL: http://www.unav.edu/documents/10174/6546776/1352909245_WP_UNAV_17_12.pdf
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    References listed on IDEAS

    as
    1. C.C. von Weizsaker, 1980. "A Welfare Analysis of Barriers to Entry," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 399-420, Autumn.
    2. Kotaro Suzumura & Kazuharu Kiyono, 1987. "Entry Barriers and Economic Welfare," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(1), pages 157-167.
    3. Chang-Tai Hsieh & Enrico Moretti, 2003. "Can Free Entry Be Inefficient? Fixed Commissions and Social Waste in the Real Estate Industry," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 1076-1122, October.
    4. Arghya Ghosh & Souresh Saha, 2007. "Excess Entry in the Absence of Scale Economies," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 30(3), pages 575-586, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Free entry; Social welfare; Oligopoly;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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