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Welfare Analysis of Free Entry in a Dynamic General Equilibrium Model

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Author Info

  • Koichi Futagami

    ()
    (Graduate School of Economics, Osaka University)

  • Tatsuro Iwaisako

    ()
    (Graduate School of Economics, Osaka University)

  • Makoto Okamura

    ()
    (Economics Department, Hiroshima University)

Abstract

This paper presents a welfare analysis of free entry equilibrium in dynamic general equilibrium environments with oligopolistic competition. First, we show that a marginal decrease in the number of firms at the free entry equilibrium improves social welfare. Second, we show that if a government can control the number of entrants intertemporally so as to maximize the level of social welfare, the number of entrants under free entry may be less than the second-best number of entrants. Capital accumulation plays an important role in determining whether excess entry occurs.

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File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/1120.pdf
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Bibliographic Info

Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 11-20.

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Length: 35 pages
Date of creation: May 2011
Date of revision:
Handle: RePEc:osk:wpaper:1120

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Web page: http://www.econ.osaka-u.ac.jp/
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Keywords: Excess entry; Oligopolistic competition; Dynamic general equilibrium;

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  1. Dos Santos Ferreira, Rodolphe & Lloyd-Braga, Teresa, 2005. "Non-linear endogenous fluctuations with free entry and variable markups," Journal of Economic Dynamics and Control, Elsevier, vol. 29(5), pages 847-871, May.
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