Skip to main content
SpringerLink
Log in

Endogenous cost asymmetry and insufficient entry in the absence of scale economies

  • Published:
Journal of Economics Aims and scope Submit manuscript

Abstract

The paper by Ghosh and Saha (Econ Theory 30:575–586, 2007) shows that entry can be socially excessive even if there are no scale economies. We show that exogenous cost asymmetry is responsible for this result. In a simple model with R&D investment by the more cost efficient firm, thus creating endogenous cost asymmetry, we show that entry is socially insufficient instead of excessive if the slope of the marginal cost of R&D is not very high.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Anderson SP, de Palma A, Nesterov Y (1995) Oligopolistic competition and the optimal provision of products. Econometrica 63: 1281–1301

    Article  Google Scholar 

  • Cabral LMB (2004) Simultaneous entry and welfare. Eur Econ Rev 48: 943–957

    Article  Google Scholar 

  • Fudenberg D, Tirole J (2000) Pricing a network good to deter entry. J Ind Econ XLVIII:373–390

    Google Scholar 

  • Ghosh A, Morita A (2007a) Free entry and social efficiency under vertical oligopoly. Rand J Econ 38: 539–552

    Article  Google Scholar 

  • Ghosh A, Morita A (2007b) Social desirability of free entry: a bilateral oligopoly analysis. Int J Ind Org 25: 925–934

    Article  Google Scholar 

  • Ghosh A, Saha S (2007) Excess entry in the absence of scale economies. Econ Theory 30: 575–586

    Article  Google Scholar 

  • Mankiw AG, Whinston MD (1986) Free entry and social inefficiency. Rand J Econ 17: 48–58

    Article  Google Scholar 

  • Okuno-Fujiwara M, Suzumura K (1993) Symmetric Cournot oligopoly and economic welfare: a synthesis. Econ Theory 3: 43–59

    Article  Google Scholar 

  • Suzumura K (1995) Competition, commitment and welfare. Clarendon Press, Oxford

    Google Scholar 

  • Suzumura K, Kiyono K (1987) Entry barriers and economic welfare. Rev Econ Stud 54: 157–167

    Article  Google Scholar 

  • Zhao J (2009) Necessary and sufficient conditions for the optimal number of firms. J Econ 98: 235–246

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. University of Nottingham and The Leverhulme Centre for Research in Globalisation and Economic Policy, Nottingham, UK

    Arijit Mukherjee

  2. CESifo, Munich, Germany

    Arijit Mukherjee

  3. School of Economics, University of Nottingham, University Park, Nottingham, NG7 2RD, UK

    Arijit Mukherjee

Authors
  1. Arijit Mukherjee
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Arijit Mukherjee.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Mukherjee, A. Endogenous cost asymmetry and insufficient entry in the absence of scale economies. J Econ 106, 75–82 (2012). https://doi.org/10.1007/s00712-011-0255-3

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s00712-011-0255-3

Keywords

JEL Classification

Search

Navigation