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Short term entry barriers may be good for long term competition

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  • Jean-Pierre Ponssard

    (X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique)

Abstract

Entry barriers encourage competition "for" the market as opposed to "in" the market. Efficient entrants use penetrating strategies while inefficient incumbents harvest the market before leaving. These phenomenon are explored in an infinite horizon game in which history matters. Under some circumstances, higher entry barriers induce entry of efficient firms while lower entry barriers would not. This comes from the expected benefit of future rents. Social welfare may be enhanced as well. This result suggests that a rule of reason should be applied and that entry barriers should not be considered per se anticompetitive.

Suggested Citation

  • Jean-Pierre Ponssard, 2008. "Short term entry barriers may be good for long term competition," Working Papers hal-00347663, HAL.
    • Handle: RePEc:hal:wpaper:hal-00347663
    Note: View the original document on HAL open archive server: https://hal.science/hal-00347663
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    6. Norman,George & Thisse,Jacques-François (ed.), 2000. "Market Structure and Competition Policy," Cambridge Books, Cambridge University Press, number 9780521783330.
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