Entry in a Stackelberg perfect equilibrium
AbstractThis paper considers welfare effects of entry when the incumbent firm behaves like a Stackelberg leader in the product market. In contrast to the existing literature, we show that entry may increase welfare for any cost asymmetries between the firms. Using a general demand function we show the condition for welfare improving entry.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 12 (2007)
Issue (Month): 33 ()
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Cournot competition Entry Stackelberg competition Welfare;
Find related papers by JEL classification:
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- D3 - Microeconomics - - Distribution
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- Roger Clarke & David Collie, 2003.
"Product differentiation and the gains from trade under Bertrand duopoly,"
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- N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring.
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