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Switching Costs And The Foreign Firm'S Entry

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Author Info
TORU KIKUCHI

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Abstract

In this paper we consider a two-period model of market entry with homogeneous products and switching costs. It is shown that the pro-competitive effect of a foreign firm's entry (i.e. unilateral trade liberalization) emerges before the entry. Also, conditions that are conducive to a competitive environment in the second period are shown to yield a less competitive outcome in the first period. That is, when the marginal cost of the foreign entrant is relatively low, the first-period output of a domestic monopolist is relatively low as well. Copyright © 2009 The Author. Journal compilation © 2009 Blackwell Publishing Ltd and The University of Manchester.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9957.2009.02101.x
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Publisher Info
Article provided by University of Manchester in its journal The Manchester School.

Volume (Year): 77 (2009)
Issue (Month): 3 (06)
Pages: 366-372
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Handle: RePEc:bla:manchs:v:77:y:2009:i:3:p:366-372

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  1. To, Theodore, 1994. "Export subsidies and oligopoly with switching costs," Journal of International Economics, Elsevier, vol. 37(1-2), pages 97-110, August. [Downloadable!] (restricted)
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  2. Markusen, James R., 1981. "Trade and the gains from trade with imperfect competition," Journal of International Economics, Elsevier, vol. 11(4), pages 531-551, November. [Downloadable!] (restricted)
  3. Klemperer, Paul D, 1987. "Entry Deterrence in Markets with Consumer Switching Costs," Economic Journal, Royal Economic Society, vol. 97(388a), pages 99-117, Supplemen. [Downloadable!] (restricted)
  4. Paul Klemperer, 1987. "The Competitiveness of Markets with Switching Costs," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 138-150, Spring. [Downloadable!] (restricted)
  5. Klemperer, Paul, 1987. "Markets with Consumer Switching Costs," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 375-94, May. [Downloadable!] (restricted)
  6. Brander, James A., 1981. "Intra-industry trade in identical commodities," Journal of International Economics, Elsevier, vol. 11(1), pages 1-14, February. [Downloadable!] (restricted)
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  7. Toru Kikuchi, 2007. "Switching costs and the impact of trade liberalization," Economics Bulletin, Economics Bulletin, vol. 6(6), pages 1-7. [Downloadable!]
  8. Collie, David R & Roger Clarke, 2003. "Product Differentiation and the Gains from Trade under Bertrand Duopoly," Royal Economic Society Annual Conference 2003 47, Royal Economic Society. [Downloadable!]
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  9. Collie, David & de Meza, David, 2003. "Comparative advantage and the pursuit of strategic trade policy," Economics Letters, Elsevier, vol. 81(2), pages 279-283, November. [Downloadable!] (restricted)
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