Advanced Search
MyIDEAS: Login to save this article or follow this journal

The welfare effects of entry: the role of the input market

Contents:

Author Info

  • Arijit Mukherjee

    ()

  • Udo Broll
  • Soma Mukherjee

Abstract

In a successive Cournot oligopoly, we show the welfare effects of entry in the final goods market with no scale economies but with cost difference between the firms. If the input market is very concentrated, entry in the final goods market always increases welfare. If the input market is moderately concentrated, entry in the final goods market reduces welfare if the entrant is moderately cost inefficient than the incumbents. If the input market is highly competitive, entry in the final goods market reduces welfare if the entrant is very much cost inefficient than the incumbents. Hence, entry in the final goods market is more desirable under a concentrated input market. It follows from our analysis that entry increases the profits of the incumbent final goods producers if their marginal costs are sufficiently lower than the entrant’s marginal cost.

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://hdl.handle.net/10.1007/s00712-009-0097-4
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Springer in its journal Journal of Economics.

Volume (Year): 98 (2009)
Issue (Month): 3 (December)
Pages: 189-201

as in new window
Handle: RePEc:kap:jeczfn:v:98:y:2009:i:3:p:189-201

Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=108909

Related research

Keywords: Entry; Profit; Vertical structure; Welfare; L13; L50;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Suzumura, Kotaro & Kiyono, Kazuharu, 1987. "Entry Barriers and Economic Welfare," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 54(1), pages 157-67, January.
  2. Joshua S. Gans, 2007. "Concentration-Based Merger Tests and Vertical Market Structure," Journal of Law and Economics, University of Chicago Press, vol. 50, pages 661-681.
  3. Bertrand Crettez & Marie-Cécile Fagart, 2009. "Does entry improve welfare? A general equilibrium approach to competition policy," Journal of Economics, Springer, Springer, vol. 98(2), pages 97-118, November.
  4. Klemperer, Paul D, 1988. "Welfare Effects of Entry into Markets with Switching Costs," Journal of Industrial Economics, Wiley Blackwell, vol. 37(2), pages 159-65, December.
  5. 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, 06.
  6. Ghosh, Arghya & Morita, Hodaka, 2007. "Social desirability of free entry: A bilateral oligopoly analysis," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 25(5), pages 925-934, October.
  7. Masahiro Okuno-Fujiwara & Kotaro Suzumura, 1991. "Symmetric Cournot Oligopoly and Economic Welfare: A Synthesis," Discussion Paper Series, Institute of Economic Research, Hitotsubashi University a242, Institute of Economic Research, Hitotsubashi University.
  8. repec:ebl:ecbull:v:12:y:2007:i:33:p:1-6 is not listed on IDEAS
  9. Lahiri, Sajal & Ono, Yoshiyasu, 1988. "Helping Minor Firms Reduces Welfare," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 98(393), pages 1199-1202, December.
  10. Masahiro Abiru & Babu Nahata & Subhashis Raychaudhuri & Michael Waterson, 2003. "Equilibrium structures in vertical oligopoly," General Economics and Teaching, EconWPA 0306010, EconWPA.
  11. Greenhut, M L & Ohta, H, 1976. "Related Market Conditions and Interindustrial Mergers," American Economic Review, American Economic Association, vol. 66(3), pages 267-77, June.
  12. C.C. von Weizsaker, 1980. "A Welfare Analysis of Barriers to Entry," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 399-420, Autumn.
  13. Anderson, Simon P & de Palma, Andre & Nesterov, Yurii, 1995. "Oligopolistic Competition and the Optimal Provision of Products," Econometrica, Econometric Society, Econometric Society, vol. 63(6), pages 1281-1301, November.
  14. Salinger, Michael A, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 103(2), pages 345-56, May.
  15. Ishikawa, Jota & Spencer, Barbara J., 1999. "Rent-shifting export subsidies with an imported intermediate product," Journal of International Economics, Elsevier, vol. 48(2), pages 199-232, August.
  16. Arijit Mukherjee, . "Note on a generalized wage rigidity result," Discussion Papers 07/04, University of Nottingham, School of Economics.
  17. Arijit Mukherjee, . "Excessive entry in a bilateral oligopoly," Discussion Papers 08/02, University of Nottingham, School of Economics.
  18. Arghya Ghosh & Souresh Saha, 2007. "Excess Entry in the Absence of Scale Economies," Economic Theory, Springer, Springer, vol. 30(3), pages 575-586, March.
  19. Perry, Martin K, 1984. "Scale Economies, Imperfect Competition, and Public Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 32(3), pages 313-33, March.
  20. Spence, Michael, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 43(2), pages 217-35, June.
  21. Arijit Mukherjee & Soma Mukherjee, 2008. "Excess-Entry Theorem: The Implications Of Licensing," Manchester School, University of Manchester, vol. 76(6), pages 675-689, December.
  22. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  23. repec:ebl:ecbull:v:10:y:2007:i:12:p:1-9 is not listed on IDEAS
  24. Matsushima, Noriaki, 2006. "Industry profits and free entry in input markets," Economics Letters, Elsevier, vol. 93(3), pages 329-336, December.
  25. Naylor, Robin, 2002. "The Effects Of Entry In Bilateral Oligopoly," The Warwick Economics Research Paper Series (TWERPS) 638, University of Warwick, Department of Economics.
  26. Dhillon, Amrita & Petrakis, Emmanuel, 2002. "A generalised wage rigidity result," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 20(3), pages 285-311, March.
  27. 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.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Junichiro Ishida & Toshihiro Matsumura & Noriaki Matsushima, 2010. "Market Competition, R&D and Firm Profits in Asymmetric Oligopoly," ISER Discussion Paper 0777, Institute of Social and Economic Research, Osaka University.
  2. Kazuhiro Takauchi, 2014. "Rules of Origin and Strategic Choice of Compliance," Journal of Industry, Competition and Trade, Springer, vol. 14(2), pages 287-302, June.
  3. Matsushima, Noriaki & Mizuno, Tomomichi, 2012. "Profit-enhancing competitive pressure in vertically related industries," Journal of the Japanese and International Economies, Elsevier, vol. 26(1), pages 142-152.
  4. Fanti, Luciano & Meccheri, Nicola, 2014. "Profits and competition under alternative technologies in a unionized duopoly with product differentiation," Research in Economics, Elsevier, Elsevier, vol. 68(2), pages 157-168.
  5. Naylor, Robin & Soegaard, Christian, 2014. "The Effects of Entry in Oligopoly with Bargained Wages," The Warwick Economics Research Paper Series (TWERPS) 1044, University of Warwick, Department of Economics.
  6. Ioannis N. Pinopoulos, 2014. "A note on the effects of downstream free entry on wholesale pricing," Discussion Paper Series 2014_05, Department of Economics, University of Macedonia, revised Sep 2014.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:kap:jeczfn:v:98:y:2009:i:3:p:189-201. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.