Free Entry and Social Inefficiency under Co-opetition
AbstractWe investigate the social desirability of free entry in the co-opetition model in which firms compete in a homogeneous product market while sharing common property resources that affect market size or consumers' willingness to pay for products. We show that free entry leads to socially excessive or insufficient entry into the market in the case of non-commitment co-opetition, depending on the magnitude of "business stealing" and "common property" effects of entry. On the other hand, in the case of pre-commitment co-opetition, free entry leads to excess entry and a decline in the common property resources. Interestingly, in the latter case, the excess entry result of Mankiw and Whinston (1986) and Suzumura and Kiyono (1987) holds even when there are no entry (set-up) costs for entrants. These results have important policy implications for entry regulations.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 44816.
Date of creation: 06 Mar 2013
Date of revision:
Excess entry; Free entry; Co-opetition; Entry regulations; Common property resource;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-16 (All new papers)
- NEP-BEC-2013-03-16 (Business Economics)
- NEP-COM-2013-03-16 (Industrial Competition)
- NEP-IND-2013-03-16 (Industrial Organization)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Arghya Ghosh & Hodaka Morita, 2007. "Free entry and social efficiency under vertical oligopoly," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 541-554, 06.
- Yiquan Gu & Tobias Wenzel, 2007.
"A Note on the Excess Entry Theorem in Spatial Models with Elastic Demand,"
Ruhr Economic Papers, Rheinisch-WestfÃ¤lisches Institut fÃ¼r Wirtschaftsforschung, Ruhr-UniversitÃ¤t Bochum, UniversitÃ¤t Dortmund, UniversitÃ¤t Duisburg-Essen
0033, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
- Gu, Yiquan & Wenzel, Tobias, 2009. "A note on the excess entry theorem in spatial models with elastic demand," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 27(5), pages 567-571, September.
- Steven T. Berry & Joel Waldfogel, 1999.
"Free Entry and Social Inefficiency in Radio Broadcasting,"
RAND Journal of Economics,
The RAND Corporation, vol. 30(3), pages 397-420, Autumn.
- Steven Berry & Joel Waldfogel, 1996. "Free Entry and Social Inefficiency in Radio Broadcasting," NBER Working Papers 5528, National Bureau of Economic Research, Inc.
- Kühn, Kai-Uwe & Vives, Xavier, 1995.
"Excess Entry, Vertical Integration and Welfare,"
CEPR Discussion Papers, C.E.P.R. Discussion Papers
1293, C.E.P.R. Discussion Papers.
- Shoji Haruna & Rajeev Goel, 2011. "R&D, free entry, and social inefficiency," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 20(1), pages 89-101.
- Konishi, Hideki & Okuno-Fujiwara, Masahiro & Suzumura, Kotaro, 1990. "Oligopolistic competition and economic welfare : A general equilibrium analysis of entry regulation and tax-subsidy schemes," Journal of Public Economics, Elsevier, Elsevier, vol. 42(1), pages 67-88, June.
- C.C. von Weizsaker, 1980. "A Welfare Analysis of Barriers to Entry," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 11(2), pages 399-420, Autumn.
- Dixit, Avinash K & Stiglitz, Joseph E, 1975.
"Monopolistic Competition and Optimum Product Diversity,"
The Warwick Economics Research Paper Series (TWERPS)
64, University of Warwick, Department of Economics.
- Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, American Economic Association, vol. 67(3), pages 297-308, June.
- N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring.
- Varian, Hal R., 1995. "Entry and cost reduction," Japan and the World Economy, Elsevier, Elsevier, vol. 7(4), pages 399-410, November.
- Matsumura, Toshihiro & Okamura, Makoto, 2006. "Equilibrium number of firms and economic welfare in a spatial price discrimination model," Economics Letters, Elsevier, Elsevier, vol. 90(3), pages 396-401, March.
- Suzumura, Kotaro & Kiyono, Kazuharu, 1987. "Entry Barriers and Economic Welfare," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 54(1), pages 157-67, January.
- Arghya Ghosh & Souresh Saha, 2007. "Excess Entry in the Absence of Scale Economies," Economic Theory, Springer, Springer, vol. 30(3), pages 575-586, March.
- Arijit Mukherjee & Soma Mukherjee, 2008. "Excess-Entry Theorem: The Implications Of Licensing," Manchester School, University of Manchester, vol. 76(6), pages 675-689, December.
- Jaehong Kim, 1997. "Inefficiency of the Subgame Optimal Entry Regulation," RAND Journal of Economics, The RAND Corporation, vol. 28(1), pages 25-36, Spring.
- Okuno-Fujiwara, Masahiro & Suzumura, Kotaro, 1993.
"Symmetric Cournot Oligopoly and Economic Welfare: A Synthesis,"
Economic Theory, Springer,
Springer, vol. 3(1), pages 43-59, January.
- Masahiro Okuno-Fujiwara & Kotaro Suzumura, 1991. "Symmetric Cournot Oligopoly and Economic Welfare: A Synthesis," Discussion Paper Series, Institute of Economic Research, Hitotsubashi University a242, Institute of Economic Research, Hitotsubashi University.
- Spence, Michael, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 43(2), pages 217-35, June.
- Perry, Martin K, 1984. "Scale Economies, Imperfect Competition, and Public Policy," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 32(3), pages 313-33, March.
- Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.