It is widely believed that welfare would be improved by encouraging entry in circumstances where "barriers to entry" (in the sense of Bain) exist. Two models are developed herein which demonstrate that this view is incautious. Economies of scale and product differentiation are both held to be barriers to entry in the Bain scheme of analysis. I show that there are plausible parameter configurations for both economies of scale and goodwill (which is a variant of product differentiation) under which welfare would be improved by increasing, rather than decreasing, the protection of incumbents from the competition of entrants. Greater attention to detail in the analysis of industry circumstances and greater caution in reaching "obvious" welfare conclusions are needed.
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Volume (Year): 11 (1980) Issue (Month): 2 (Autumn) Pages: 399-420 Download reference. The following formats are available: HTML
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Volker Nocke & Martin Peitz & Konrad Stahl, 2004.
"Platform Ownership,"
PIER Working Paper Archive
04-029, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
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Volker Nocke & Martin Peitz & Konrad Stahl, 2004.
"Platform Ownership,"
Discussion Papers
16, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
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