Entry Barriers and Economic Welfare
The relationship between economic welfare and the number of firms in a quas i-Cournot market is examined. The authors presuppose the existence of a strong ( "first-best") government that can enforce themarginal-cost principle along wi th regulating the number of firms. It is shown that there exist excessive number of firms at the free-entry quasi-Cournot equilibrium relative to the "first best." The thrust of this result survives even if a utopian "first-best" govern ment is replaced by a "second-best" government that leaves the firms to pursue their respective profit maximization freely and engages solely in regulating th e number of firms. Copyright 1987 by The Review of Economic Studies Limited.
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Volume (Year): 54 (1987)
Issue (Month): 1 (January)
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