Endogenous cost asymmetry and insufficient entry in the absence of scale economies

Arijit Mukherjee

Discussion Papers from University of Nottingham, School of Economics

Abstract: The literature analysing social efficiency of entry argues that entry is always socially excessive in industries with asymmetric cost firms and no scale economies. We show that exogenous cost asymmetry is responsible for this result. In a simple model with endogenous R&D investment by the more cost efficient firm, thus creating endogenous cost asymmetry, we show that entry is socially insufficient instead of excessive if slope of the marginal cost of R&D is not very high.

Keywords: Excessive entry; Insufficient entry; Cost asymmetry; R&D (search for similar items in EconPapers)
Date: 2010-12
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Journal Article: Endogenous cost asymmetry and insufficient entry in the absence of scale economies (2012)
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