Social Efficiency of Free Entry in a Vertically Related Industry with Cost and Technology Asymmetry

Chen Ding, Wu Di (), Cao Hang and Wang Leonard F. S. ()
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Chen Ding: School of Economics and Management, Xi’an Shiyou University, Xi’an, Shaanxi, China
Wu Di: School of Economics, Nankai University, Tianjin, China
Cao Hang: School of Business Administration, Jiangxi University of Finance and Economics, Nanchang, China
Wang Leonard F. S.: Asia Pacific Research Foundation, Kaohsiung, Taiwan

The B.E. Journal of Economic Analysis & Policy, 2025, vol. 25, issue 3, 665-679

Abstract: This paper examines the impact of cost and technology asymmetry on social efficiency in a vertically related industry. If production costs for final goods are asymmetric and technology is symmetric, and if the entrant’s cost is moderate, then downstream entry is socially insufficient, regardless of whether there are economies or diseconomies of scale. Extending the analysis to asymmetric production technologies and symmetric cost, we show that the issue of socially insufficient entry persists. Thus, anti-competitive entry regulations should account for cost and technology asymmetries among competing firms.

Keywords: vertical structure; asymmetrical cost; asymmetrical technology; social efficiency (search for similar items in EconPapers)
JEL-codes: F13 L13 L40 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1515/bejeap-2024-0280

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