The literature on excess entry shows that the free-entry equilibrium number of firms may be greater than is socially optimal, and proposes government entry regulation as a remedy. This article tries to show that such a policy recommendation is misleading. A two-period, three-person entry game model, which explicitly includes second-best government, shows that entry regulation aimed at preventing excess entry actually induces the incumbent to behave strategically against the government and makes the final outcome socially suboptimal compared to cases in which there is no government intervention. Entry regulation is subgame optimal; however, it is globally suboptimal.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
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.
For technical questions regarding this item, or to correct its listing, contact: ().
Related research
Keywords:
Cited by: (explanations, 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.)