Switching Costs and the foreign Firm's Entry
This paper considers a two-period model of market entry with homogeneous products and switching costs. It is shown that the pro-competitive effect of a foreign firm's entry (i.e., unilateral trade liberalization) emerges before the entry. Also, conditions that are conducive to a competitive environment in the second-period are shown to yield a less competitive outcome in the first-period. That is, when the marginal cost of the foreign entrant is relatively low, the first-period output of a domestic monopolist is relatively low as well.
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- Paul Klemperer, 1995. "Competition when Consumers have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Oxford University Press, vol. 62(4), pages 515-539.
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- Paul Klemperer, 1987. "Markets with Consumer Switching Costs," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 375-394.
- Toru Kikuchi, 2007. "Switching costs and the impact of trade liberalization," Economics Bulletin, AccessEcon, vol. 6(6), pages 1-7.
- Klemperer, Paul D, 1987. "Entry Deterrence in Markets with Consumer Switching Costs," Economic Journal, Royal Economic Society, vol. 97(388a), pages 99-117, Supplemen. Full references (including those not matched with items on IDEAS)
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