Munich Personal RePEc Archive

Welfare Implications of Sequential Entry with Heterogeneous Firms

Hattori, Keisuke and Yamada, Mai (2020): Welfare Implications of Sequential Entry with Heterogeneous Firms.

This is the latest version of this item.

[img]
Preview
PDF
MPRA_paper_104640.pdf

Download (319kB) | Preview

Abstract

Does free entry result in the socially preferred order of market entry for heterogeneous firms? This paper examines the welfare effects of sequential market entry by using a simple entry-deterrence model with heterogeneities in fixed and variable production costs among firms. In particular, we consider the question of whether a less or more efficient firm should be the first entrant into a new market from a welfare perspective. We show that the order of entry whereby a more efficient firm enters the market first may lead to welfare loss due to the less aggressive entry deterrence efforts made by the first entrant. Our findings have important policy implications with regard to the welfare consequences of free entry markets and the privatization of public monopolies through auctions.

Available Versions of this Item

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.