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Free entry under an output-cap constraint

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  • Ino, Hiroaki
  • Matsumura, Toshihiro

Abstract

This study considers a peer-to-peer market with capacity-constrained suppliers. We examine a free-entry market of individual suppliers and discuss the welfare consequences of Cournot competition. In contrast to the well-known “Excess entry theorem”, we show that the number of entries is socially optimal.

Suggested Citation

  • Ino, Hiroaki & Matsumura, Toshihiro, 2022. "Free entry under an output-cap constraint," Economics Letters, Elsevier, vol. 210(C).
    • Handle: RePEc:eee:ecolet:v:210:y:2022:i:c:s016517652100447x
    DOI: 10.1016/j.econlet.2021.110192
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    References listed on IDEAS

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    1. 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.
    2. Gu, Yiquan & Wenzel, Tobias, 2009. "A note on the excess entry theorem in spatial models with elastic demand," International Journal of Industrial Organization, Elsevier, vol. 27(5), pages 567-571, September.
    3. Arghya Ghosh & Hodaka Morita, 2007. "Free entry and social efficiency under vertical oligopoly," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 541-554, June.
    4. Sato, Susumu & Matsumura, Toshihiro, 2020. "Free entry under common ownership," Economics Letters, Elsevier, vol. 195(C).
    5. Hiroaki Ino & Toshihiro Matsumura, 2012. "How Many Firms Should Be Leaders? Beneficial Concentration Revisited," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(4), pages 1323-1340, November.
    6. Ghosh, Arghya & Morita, Hodaka, 2007. "Social desirability of free entry: A bilateral oligopoly analysis," International Journal of Industrial Organization, Elsevier, vol. 25(5), pages 925-934, October.
    7. 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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    More about this item

    Keywords

    Cournot competition; Excess entry theorem; Capacity constraint; Sharing economy; Private lodging business;
    All these keywords.

    JEL classification:

    • 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
    • K25 - Law and Economics - - Regulation and Business Law - - - Real Estate Law

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