Entry in a Stackelberg perfect equilibrium
This paper considers welfare effects of entry when the incumbent firm behaves like a Stackelberg leader in the product market. In contrast to the existing literature, we show that entry may increase welfare for any cost asymmetries between the firms. Using a general demand function we show the condition for welfare improving entry.
Volume (Year): 12 (2007)
Issue (Month): 33 ()
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- Eric van Damme & Sjaak Hurkens, 1996.
"Endogenous Stackelberg leadership,"
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- Arghya Ghosh & Souresh Saha, 2007. "Excess Entry in the Absence of Scale Economies," Economic Theory, Springer, vol. 30(3), pages 575-586, March.
- Klemperer, Paul D, 1988. "Welfare Effects of Entry into Markets with Switching Costs," Journal of Industrial Economics, Wiley Blackwell, vol. 37(2), pages 159-65, December.
- C.C. von Weizsaker, 1980. "A Welfare Analysis of Barriers to Entry," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 399-420, Autumn.
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