On Excessive Entry in Bayes-Cournot Oligopoly

Michele Bisceglia, Jorge Padilla, Joe Willie Pinetop Perkins and Salvatore Piccolo
Additional contact information
Michele Bisceglia: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Jorge Padilla: Compass Lexecon
Joe Willie Pinetop Perkins: Compass Lexecon
Salvatore Piccolo: Compass Lexecon

Post-Print from HAL

Abstract: In a Cournot industry where firms are privately informed about their marginal costs, raising entry barriers (i.e., imposing strictly positive, but not too large, entry costs) increases expected output, entrants' profits, total welfare, and might benefit consumers. Under Bayes-Cournot competition, firms react to the expectation (conditional on entry) of rivals' costs rather than to their actual costs. This creates scope for entry by relatively inefficient types. Entry costs that prevent these high-cost types from entering increase inframarginal (lower-cost) types' and rivals' expected output. As a result, they increase profits and, unless they reduce output variability too much, also consumer surplus.

Keywords: Entry; Bayes-Cournot game; Welfare (search for similar items in EconPapers)
Date: 2024-12
References: Add references at CitEc
Citations:

Published in RAND Journal of Economics, 2024, 55 (4), pp.719-748. ⟨10.1111/1756-2171.12479⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05241436

DOI: 10.1111/1756-2171.12479

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().