SWITCHING COSTS AND THE FOREIGN FIRM'S ENTRY*

Toru Kikuchi

Manchester School, 2009, vol. 77, issue 3, 366-372

Abstract: In this paper we consider a two‐period model of market entry with homogeneous products and switching costs. It is shown that the pro‐competitive effect of a foreign firm's entry (i.e. unilateral trade liberalization) emerges before the entry. Also, conditions that are conducive to a competitive environment in the second period are shown to yield a less competitive outcome in the first period. That is, when the marginal cost of the foreign entrant is relatively low, the first‐period output of a domestic monopolist is relatively low as well.

Date: 2009
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https://doi.org/10.1111/j.1467-9957.2009.02101.x

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Working Paper: Switching Costs and the foreign Firm's Entry (2008)
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