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Short term entry barriers may be good for long term competition


  • Jean-Pierre Ponssard

    (Department of Economics, Ecole Polytechnique - Polytechnique - X - CNRS - Centre National de la Recherche Scientifique)


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.

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  • 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
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    References listed on IDEAS

    1. Philippe Aghion & Richard Blundell & Rachel Griffith & Peter Howitt & Susanne Prantl, 2009. "The Effects of Entry on Incumbent Innovation and Productivity," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 20-32, February.
    2. Biglaiser, Gary & Crémer, Jacques & Dobos, Gergely, 2013. "The value of switching costs," Journal of Economic Theory, Elsevier, vol. 148(3), pages 935-952.
    3. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Multiproduct Firms, Product Differentiation, and Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
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