This 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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Article provided by Economics Bulletin in its journal Economics Bulletin.
Find related papers by JEL classification: L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance D3 - Microeconomics - - Distribution
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