Regulatory Barriers & Entry in Developing Economies

John Bennett () and Saul Estrin

No 824, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: We model entry by entrepreneurs into new markets in developing economies with regulatory barriers in the form of licence fees and bureaucratic delay. Because laissez faire leads to ‘excessive’ entry, a licence fee can increase welfare by discouraging entry. However, in the presence of a licence fee, bureaucratic delay creates a strategic opportunity, which can result in both greater entry by first movers and a higher steady-state number of firms. Delay also leads to speculation, with entrepreneurs taking out licences to obtain the option of immediate entry if they later observe the industry to be profitable enough.

Keywords: Entry; Entry Barriers; Developing Economy. (search for similar items in EconPapers)
JEL-codes: L15 O14 (search for similar items in EconPapers)
Pages: pages
Date: 2006-03-01
New Economics Papers: this item is included in nep-com, nep-dev, nep-ent, nep-ind and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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