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Organizational Entry Deterrence Barrier:The Japanese Firm vs.the American Firm

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Author Info

  • Koichi Futagami

    (Osaka University)

  • Makoto Okamura

    (Hiroshima University)

  • Tetsuya Shinkai

    ()
    (Kwansei Gakuin University)

  • Nobuhiro Mori

    (Nara University of Education)

Abstract

We formulate a three-stage game in which a Japanese firm as a generalized labor-managed firm and an American firm as a profit-maximizing firm compete in the homogeneous product market. In the first stage of the game, both the firms decide whether they enter the market or not. In the second stage, they invest capital stocks. In the third stage, they play a Nash-Cournot quantity game. We show that the Japanese firm employs more capital and produces more than does the American firm. By intentionally raising its fixed cost, the Japanese firm can survive in the market even though the American firm exits. Based on the difference in firm objectives, the Japanese firm builds an organizational deterrence barrier against the American firm through its high fixed cost. We give a rationale for long-term transactions between Japanese firms.

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File URL: http://192.218.163.163/RePEc/pdf/kgdp23.pdf
File Function: First version, 2005
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Bibliographic Info

Paper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 23.

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Length: 21 pages
Date of creation: Jan 2005
Date of revision: Jan 2005
Handle: RePEc:kgu:wpaper:23

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Related research

Keywords: Generalized Labor-Managed Firm; Profit-Maximizing Firm; Organizational Entry Deterrence;

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References

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  1. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, vol. 90(357), pages 95-106, March.
  2. Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring.
  3. Meade, James E, 1972. "The Theory of Labour-Managed Firms and of Profit Sharing," Economic Journal, Royal Economic Society, vol. 82(325), pages 402-28, Supplemen.
  4. Barbara J. Spencer & James A. Brander, 1982. "Strategic Commitment with R&D: The Symmetric Case," Working Papers 516, Queen's University, Department of Economics.
  5. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
  6. Futagami, Koichi & Okamura, Makoto, 1996. "Strategic Investment: The Labor-Managed Firm and the Profit-Maximizing Firm," Journal of Comparative Economics, Elsevier, vol. 23(1), pages 73-91, August.
  7. Stewart, Geoff, 1991. "Strategic Entry Interactions Involving Profit-Maximising and Labour-Managed Firms," Oxford Economic Papers, Oxford University Press, vol. 43(4), pages 570-83, October.
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