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Free Entry and Social Inefficiency under Co-opetition

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  • Hattori, Keisuke
  • Yoshikawa, Takeshi

Abstract

We investigate the social desirability of free entry in the co-opetition model in which firms compete in a homogeneous product market while sharing common property resources that affect market size or consumers' willingness to pay for products. We show that free entry leads to socially excessive or insufficient entry into the market in the case of non-commitment co-opetition, depending on the magnitude of "business stealing" and "common property" effects of entry. On the other hand, in the case of pre-commitment co-opetition, free entry leads to excess entry and a decline in the common property resources. Interestingly, in the latter case, the excess entry result of Mankiw and Whinston (1986) and Suzumura and Kiyono (1987) holds even when there are no entry (set-up) costs for entrants. These results have important policy implications for entry regulations.

Suggested Citation

  • Hattori, Keisuke & Yoshikawa, Takeshi, 2013. "Free Entry and Social Inefficiency under Co-opetition," MPRA Paper 44816, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:44816
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Toshihiro Matsumura & Atsushi Yamagishi, 2017. "Lobbying for Regulation Reform by Industry Leaders," Journal of Regulatory Economics, Springer, vol. 52(1), pages 63-76, August.
    2. repec:eee:reveco:v:50:y:2017:i:c:p:1-7 is not listed on IDEAS
    3. Kőhegyi, Gergely & Selei, Adrienn & Kiss, Hubert János & Zsoldos, János, 2014. "Koopetíció - néhány elméleti és empirikus eredmény egy kooperatív elemeket tartalmazó versenyzői helyzetről
      [Coopetition": Some theoretical and empirical results of a competitive situation wit
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 1000-1021.
    4. repec:kap:jeczfn:v:123:y:2018:i:1:d:10.1007_s00712-017-0559-z is not listed on IDEAS
    5. repec:kap:jeczfn:v:122:y:2017:i:1:d:10.1007_s00712-017-0534-8 is not listed on IDEAS

    More about this item

    Keywords

    Excess entry; Free entry; Co-opetition; Entry regulations; Common property resource;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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