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Price-sensitive demand and market entry

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  • Yiquan Gu
  • Alexander Rasch
  • Tobias Wenzel

Abstract

This paper revisits the optimal entry decision in a differentiated product market where customer demand is price-sensitive and depends on a per-unit transport cost. We show that too few firms may enter for high entry cost and high transport cost compared to the socially optimal outcome.
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Suggested Citation

  • Yiquan Gu & Alexander Rasch & Tobias Wenzel, 2016. "Price-sensitive demand and market entry," Papers in Regional Science, Wiley Blackwell, vol. 95(4), pages 865-875, November.
    • Handle: RePEc:bla:presci:v:95:y:2016:i:4:p:865-875
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    File URL: http://hdl.handle.net/10.1111/pirs.12165
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    References listed on IDEAS

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    Cited by:

    1. Gu, Yiquan & Rasch, Alexander & Wenzel, Tobias, 2022. "Consumer salience and quality provision in (un)regulated public service markets," Regional Science and Urban Economics, Elsevier, vol. 93(C).

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    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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