Market Entry Regulation and International Competition

Frank Stähler and Thorsten Upmann

Review of International Economics, 2008, vol. 16, issue 4, pages 611-626

Abstract: We analyze a non-cooperative two-country game where each government decides whether to allow free market entry of firms or to regulate market access. We show that a Pareto-efficient allocation may result in equilibrium. In particular, if the cost difference between home and foreign production is "significant," production will be located in the cost-efficient country exclusively; and if this cost difference is even "substantial," the induced allocation is also Pareto efficient. Only if the cost difference is "insignificant," production may take place in both countries and the allocation is inefficient. Copyright © 2008 The Authors. Journal compilation © 2008 Blackwell Publishing Ltd.

Date: 2008

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