Untimely Entry

David Mills ()

Journal of Industrial Economics, 1991, vol. 39, issue 6, 659-70

Abstract: Recent research indicates that when entrants incur set-up costs there is a tendency for oligopolistic industries to support too many firms. This is because incumbents accommodate entrants by reducing their output and making entry profitable beyond the point where it is socially efficient. The author shows here that set-up costs also distort the timing of entry and that entry dynamics inflate the social cost of excessive entry. Various approaches to regulating entry are evaluated and compared. Entry fees are shown to be superior to other methods in reducing the social cost of both excessive and untimely entry. Copyright 1991 by Blackwell Publishing Ltd.

Date: 1991
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