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Two Rationales for Insufficient Entry

Author

Listed:
  • Chen Linfeng

    (School of Economics and Management, Changzhou Institute of Technology, CZ Reform and Development of Entrepreneurship and Innovation & Research Center, Changzhou, Jiangsu, 213032, China)

  • Li Tan

    (School of Economics and Management, Changzhou Institute of Technology, Changzhou, Jiangsu, 213032, China)

  • Qian Bing

    (School of Economics and Management, Changzhou Institute of Technology, Changzhou, Jiangsu, 213032, China)

Abstract

This study offers two new rationales for insufficient entry in a given industry. The first is the presence of complementary industries. Suppose there is free entry in an industry and the complementary industries are monopolistic. If the number of complementary industries is sufficiently high, then there is insufficient entry. However, if these industries are substitutes, then there is always excessive entry. The second rationale is that there is cost-reducing R&D investment and spillover. When the spillover rate is sufficiently high, there is insufficient entry. Further, we consider the general model and obtain similar results.

Suggested Citation

  • Chen Linfeng & Li Tan & Qian Bing, 2020. "Two Rationales for Insufficient Entry," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 20(1), pages 1-8, January.
    • Handle: RePEc:bpj:bejtec:v:20:y:2020:i:1:p:8:n:5
    DOI: 10.1515/bejte-2018-0054
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    More about this item

    Keywords

    free entry; excessive entry; insufficiententry; complementary industry; R&D;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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