Profit Raising Entry
AbstractCommon wisdom suggests that entry reduces profits of the incumbent firms. On the contrary, we show that if the incumbents differ in marginal costs and the entrants behave like Stackelberg followers, entry may benefit the incumbents who are relatively cost efficient while it always hurts the cost inefficient incumbents. However, the outputs of all incumbents may be higher under entry.
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Bibliographic InfoPaper provided by University of Nottingham, School of Economics in its series Discussion Papers with number 08/01.
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Entry; Profit; Stackelberg Competition;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-05-24 (All new papers)
- NEP-COM-2008-05-24 (Industrial Competition)
- NEP-ENT-2008-05-24 (Entrepreneurship)
- NEP-IND-2008-05-24 (Industrial Organization)
- NEP-MIC-2008-05-24 (Microeconomics)
- NEP-TID-2008-05-24 (Technology & Industrial Dynamics)
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- Junichiro Ishida & Toshihiro Matsumura & Noriaki Matsushima, 2010. "Market Competition, R&D and Firm Profits in Asymmetric Oligopoly," ISER Discussion Paper 0777, Institute of Social and Economic Research, Osaka University.
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