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Entry Regulations, Welfare, And Determinants Of Market Structure

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  • Florin G. Maican
  • Matilda Orth

Abstract

Welfare effects of entry regulations are theoretically ambiguous in differentiated product markets. We use a dynamic oligopoly model of entry and exit with store†type differentiation and static price setting to evaluate how entry regulations affect long†run profitability, market structure, and welfare. Based on unique data for all retail food stores in Sweden, we estimate demand, recover variable profits, and estimate entry costs and fixed costs by store type. Counterfactual policy experiments show that welfare increases when competition is enhanced by lower entry costs. Protecting small stores by imposing licensing fees on large stores is not welfare enhancing.

Suggested Citation

  • Florin G. Maican & Matilda Orth, 2018. "Entry Regulations, Welfare, And Determinants Of Market Structure," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 59(2), pages 727-756, May.
    • Handle: RePEc:wly:iecrev:v:59:y:2018:i:2:p:727-756
    DOI: 10.1111/iere.12286
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    References listed on IDEAS

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    1. Ariel Pakes & Michael Ostrovsky & Steven Berry, 2007. "Simple estimators for the parameters of discrete dynamic games (with entry/exit examples)," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 373-399, June.
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    Cited by:

    1. Minjee Kim & Tingyu Zhou, 2021. "Does Restricting the Entry of Formula Businesses Help Mom-and-Pop Stores? The Case of Small American Towns With Unique Community Character," Economic Development Quarterly, , vol. 35(2), pages 157-173, May.
    2. Maican, Florin & Orth, Matilda, 2021. "Determinants of economies of scope in retail," International Journal of Industrial Organization, Elsevier, vol. 75(C).
    3. Unsorg, Maximiliane & Rostam-Afschar, Davud, 2021. "Entry Regulation and Competition. Evidence from retail and labor markets of pharmacists," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242426, Verein für Socialpolitik / German Economic Association.
    4. Raphael Corbi & Fabio Miessi Sanches, 2022. "Church Competition, Religious Subsidies and the Rise of Evangelicalism: a Dynamic Structural Analysis," Working Papers, Department of Economics 2022_09, University of São Paulo (FEA-USP).
    5. Varela, Mauricio J., 2018. "The costs of growth: Accelerated growth and crowd-out in the Mexican supermarket industry," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 1-52.
    6. Ramalho,Rita & Saltane,Valentina, 2019. "Does Media Stimulate Reform Efforts ?," Policy Research Working Paper Series 8984, The World Bank.
    7. Lucia Rizzica & Giacomo Roma & Gabriele Rovigatti, 2020. "The effects of shop opening hours deregulation: evidence from Italy," Temi di discussione (Economic working papers) 1281, Bank of Italy, Economic Research and International Relations Area.

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    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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