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.
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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)
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