Munich Personal RePEc Archive

Entry and Welfare in Search Markets

Chen, Yongmin and Zhang, Tianle (2016): Entry and Welfare in Search Markets.

This is the latest version of this item.

[thumbnail of MPRA_paper_71040.pdf]

Download (242kB) | Preview


The welfare effects of entry are studied in a model of consumer search. Potential entrants differ in quality, with high quality sellers being more likely to meet consumer needs. Contrary to the standard view in economics that more entry benefits consumers, we find that free entry is excessive for both consumer welfare and total welfare when entry cost is relatively low, and consumer welfare has an inverted-U relationship with entry cost. We explain why these results may arise naturally in search markets due to the search variety and search quality effects of entry, and discuss their business and policy implications.

Available Versions of this Item

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.