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Endogenous Entry and Antitrust Policy

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  • Federico Etro

    ()
    (Department of Economics, University of Milan-Bicocca)

Abstract

This article derives antitrust implications for markets where entry can be regarded as endogenous (contrary to most analysis within the post-Chicago tradition). Many applications concern issues of abuse of dominance. Endogenous entry requires a wide revision of our understanding of the role of incumbents in pricing, producing in the presence of network externalities and multi-sided markets, bundling products, price discriminating and delegating to retailers through vertical restraints: when entry is endogenous, leaders adopt aggressive strategies without exclusionary purposes and without affecting welfare negatively. Endogenous entry has also implications for the analysis of mergers (that take place only if create enough cost efficiencies and do not harm consumers), the evaluation of collusive cartels (that are unfeasible in markets where entry is endogenous) and state aids for exporting firms (which are always unilaterally optimal for international markets with free entry). The spirit of the policy recommendations of the Chicago school is broadly supported by our analysis in a solid game-theoretic framework.

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File URL: http://dipeco.economia.unimib.it/repec/pdf/mibwpaper122.pdf
File Function: First version, 2007
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Bibliographic Info

Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 122.

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Length: 38 pages
Date of creation: 2007
Date of revision: 2007
Handle: RePEc:mib:wpaper:122

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Keywords: Antitrust; Endogenous entry; Leadership; Chicago school;

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