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Endogenous Entry and Antitrust Policy

Author

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  • Federico Etro

    () (Department of Economics, University of Milan-Bicocca)

Abstract

This article derives antitrust implications for markets where entry can be regarded as endogenous (contrary to most analysis within the post-Chicago tradition). Many applications concern issues of abuse of dominance. Endogenous entry requires a wide revision of our understanding of the role of incumbents in pricing, producing in the presence of network externalities and multi-sided markets, bundling products, price discriminating and delegating to retailers through vertical restraints: when entry is endogenous, leaders adopt aggressive strategies without exclusionary purposes and without affecting welfare negatively. Endogenous entry has also implications for the analysis of mergers (that take place only if create enough cost efficiencies and do not harm consumers), the evaluation of collusive cartels (that are unfeasible in markets where entry is endogenous) and state aids for exporting firms (which are always unilaterally optimal for international markets with free entry). The spirit of the policy recommendations of the Chicago school is broadly supported by our analysis in a solid game-theoretic framework.

Suggested Citation

  • Federico Etro, 2007. "Endogenous Entry and Antitrust Policy," Working Papers 122, University of Milano-Bicocca, Department of Economics, revised 2007.
  • Handle: RePEc:mib:wpaper:122
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    File URL: http://dems.unimib.it/repec/pdf/mibwpaper122.pdf
    File Function: First version, 2007
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    More about this item

    Keywords

    Antitrust; Endogenous entry; Leadership; Chicago school;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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