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Insufficient Entry Of Employee-Controlled Firms In A Free-Entry Oligopoly

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  • Kojun HAMADA
  • Takao OHKAWA
  • Makoto OKAMURA

Abstract

This study is a theoretical examination of whether employee-controlled firms (ECFs) enter a free-entry oligopolistic market excessively or insufficiently, from the viewpoint of welfare maximization. The excess entry theorem is well known in oligopoly theory. According to this theorem, a greater number of profit-maximizing firms enter a free-entry oligopolistic market than is optimal for welfare maximization. We demonstrate the possibility that insufficient entry arises when ECFs compete in a free-entry market. In particular, we show that if both the demand and cost functions are convex, insufficient ECF entry necessarily occurs. Our results suggest that competition among firms seeking purposes other than profit might lead to insufficient entry because differences in competing firms objectives affect the intensity of market competition.

Suggested Citation

  • Kojun HAMADA & Takao OHKAWA & Makoto OKAMURA, 2018. "Insufficient Entry Of Employee-Controlled Firms In A Free-Entry Oligopoly," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 89(2), pages 437-448, June.
    • Handle: RePEc:bla:annpce:v:89:y:2018:i:2:p:437-448
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    Cited by:

    1. Goerke, Laszlo, 2020. "A political economy perspective on horizontal FDI in a dynamic Cournot-oligopoly with endogenous entry," European Journal of Political Economy, Elsevier, vol. 63(C).
    2. de Pinto Marco & Goerke Laszlo, 2019. "Efficiency Wages in Cournot-Oligopoly," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(4), pages 1-13, October.
    3. Basak Debasmita & Mukherjee Arijit, 2022. "Social Efficiency of Market Entry Under Tax Policy," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 22(3), pages 601-610, July.

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