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Social efficiency of entry with market leaders

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  • Arijit Mukherjee

Abstract

We offer a new respective to the social efficiency of entry by considering an industry with a quantity setting leader and free entry of followers. We show that whether free entry with a homogeneous product is socially excessive or insufficient depends on the identity of the leader (which is either domestic or foreign), the marginal cost difference between the leader and the followers, and whether there are scale economies. In a closed economy, entry is socially excessive (insufficient) in the presence of scale economies if the marginal cost difference between the leader and the followers is small (large), but without scale economies, entry is always socially insufficient. In an open economy with the foreign leader, entry is always socially insufficient. Our results show concern to the anti-competitive entry regulation policies following the previous literature showing socially excessive entry in Cournot oligopolies with homogeneous products and perfectly competitive input sector.

Suggested Citation

  • Arijit Mukherjee, "undated". "Social efficiency of entry with market leaders," Discussion Papers 10/07, University of Nottingham, School of Economics.
  • Handle: RePEc:not:notecp:10/07
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    Citations

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    Cited by:

    1. Federico Etro, 2014. "The Theory Of Endogenous Market Structures," Journal of Economic Surveys, Wiley Blackwell, vol. 28(5), pages 804-830, December.
    2. Etro, Federico, 2013. "Advertising and search engines. A model of leadership in search advertising," Research in Economics, Elsevier, vol. 67(1), pages 25-38.
    3. Keisuke Hattori & Takeshi Yoshikawa, 2016. "Free entry and social inefficiency under co-opetition," Journal of Economics, Springer, vol. 118(2), pages 97-119, June.
    4. repec:gam:jsusta:v:9:y:2017:i:11:p:2126-:d:119408 is not listed on IDEAS
    5. Basak, Debasmita & Mukherjee, Arijit, 2016. "Social efficiency of entry in a vertically related industry," Economics Letters, Elsevier, vol. 139(C), pages 8-10.
    6. Marjit, Sugata & Mukherjee, Arijit, 2013. "Foreign competition and social efficiency of entry," Economic Modelling, Elsevier, vol. 32(C), pages 108-112.
    7. Wang, Leonard F.S., 2016. "Do industrial and trade policy lead to excess entry and social inefficiency?," International Review of Economics & Finance, Elsevier, vol. 43(C), pages 354-362.
    8. Wang, Leonard F.S. & Lee, Jen-yao, 2013. "Foreign penetration and undesirable competition," Economic Modelling, Elsevier, vol. 30(C), pages 729-732.
    9. repec:bla:jecrev:v:68:y:2017:i:1:p:115-130 is not listed on IDEAS
    10. Kitamura, Hiroshi & Miyaoka, Akira & Sato, Misato, 2013. "Free entry, market diffusion, and social inefficiency with endogenously growing demand," Journal of the Japanese and International Economies, Elsevier, vol. 29(C), pages 98-116.
    11. Tsai, Yingyi & Mukherjee, Arijit & Chen, Jong-Rong, 2016. "Host market competition, foreign FDI and domestic welfare," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 13-22.

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