Endogenous cost asymmetry and insufficient entry in the absence of scale economies
AbstractThe literature analysing social efficiency of entry argues that entry is always socially excessive in industries with asymmetric cost firms and no scale economies. We show that exogenous cost asymmetry is responsible for this result. In a simple model with endogenous R&D investment by the more cost efficient firm, thus creating endogenous cost asymmetry, we show that entry is socially insufficient instead of excessive if slope of the marginal cost of R&D is not very high.
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Bibliographic InfoArticle provided by Springer in its journal Journal of Economics.
Volume (Year): 106 (2012)
Issue (Month): 1 (May)
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Web page: http://www.springerlink.com/link.asp?id=108909
Excessive entry; Insufficient entry; Cost asymmetry; R&D; L13; L40; L50;
Other versions of this item:
- Arijit Mukherjee, . "Endogenous cost asymmetry and insufficient entry in the absence of scale economies," Discussion Papers 10/12, University of Nottingham, School of Economics.
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
- L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
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