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Switching Costs and the foreign Firm's Entry

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  • Kikuchi, Toru

Abstract

This paper considers a two-period model of market entry with homogeneous products and switching costs. It is shown that the pro-competitive effect of a foreign firm's entry (i.e., unilateral trade liberalization) emerges before the entry. Also, conditions that are conducive to a competitive environment in the second-period are shown to yield a less competitive outcome in the first-period. That is, when the marginal cost of the foreign entrant is relatively low, the first-period output of a domestic monopolist is relatively low as well.

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File URL: http://mpra.ub.uni-muenchen.de/8093/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 8093.

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Date of creation: 2008
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Handle: RePEc:pra:mprapa:8093

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Keywords: Switching Costs; Foreign Firm's Entry;

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  1. Brander, James A., 1981. "Intra-industry trade in identical commodities," Journal of International Economics, Elsevier, Elsevier, vol. 11(1), pages 1-14, February.
  2. Collie, David & de Meza, David, 2003. "Comparative advantage and the pursuit of strategic trade policy," Economics Letters, Elsevier, Elsevier, vol. 81(2), pages 279-283, November.
  3. To, T., 1993. "Export Subsidies and Oligopoly with Switching Costs," Papers, Tilburg - Center for Economic Research 9340, Tilburg - Center for Economic Research.
  4. Markusen, James R., 1981. "Trade and the gains from trade with imperfect competition," Journal of International Economics, Elsevier, Elsevier, vol. 11(4), pages 531-551, November.
  5. Collie, David R & Roger Clarke, 2003. "Product Differentiation and the Gains from Trade under Bertrand Duopoly," Royal Economic Society Annual Conference 2003, Royal Economic Society 47, Royal Economic Society.
  6. Klemperer, Paul, 1987. "Markets with Consumer Switching Costs," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 102(2), pages 375-94, May.
  7. Toru Kikuchi, 2007. "Switching costs and the impact of trade liberalization," Economics Bulletin, AccessEcon, vol. 6(6), pages 1-7.
  8. Klemperer, Paul D, 1987. "Entry Deterrence in Markets with Consumer Switching Costs," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 97(388a), pages 99-117, Supplemen.
  9. Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 62(4), pages 515-39, October.
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