Switching Costs and the foreign Firm's Entry
AbstractThis 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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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 8093.
Date of creation: 2008
Date of revision:
Switching Costs; Foreign Firm's Entry;
Other versions of this item:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-04-15 (All new papers)
- NEP-COM-2008-04-15 (Industrial Competition)
- NEP-INT-2008-04-15 (International Trade)
- NEP-MIC-2008-04-15 (Microeconomics)
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