Organizational Entry Deterrence Barrier:The Japanese Firm vs.the American Firm

Koichi Futagami, Makoto Okamura, Tetsuya Shinkai () and Nobuhiro Mori
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Makoto Okamura: Hiroshima University
Nobuhiro Mori: Nara University of Education

No 23, Discussion Paper Series from School of Economics, Kwansei Gakuin University

Abstract: We formulate a three-stage game in which a Japanese firm as a generalized labor-managed firm and an American firm as a profit-maximizing firm compete in the homogeneous product market. In the first stage of the game, both the firms decide whether they enter the market or not. In the second stage, they invest capital stocks. In the third stage, they play a Nash-Cournot quantity game. We show that the Japanese firm employs more capital and produces more than does the American firm. By intentionally raising its fixed cost, the Japanese firm can survive in the market even though the American firm exits. Based on the difference in firm objectives, the Japanese firm builds an organizational deterrence barrier against the American firm through its high fixed cost. We give a rationale for long-term transactions between Japanese firms.

Keywords: Generalized Labor-Managed Firm; Profit-Maximizing Firm; Organizational Entry Deterrence (search for similar items in EconPapers)
JEL-codes: D43 F12 L13 P51 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2005-01, Revised 2005-01
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