Entry Policy in an Open Economy

Paul Jensen and Kala Krishna ()

Indian Economic Review, 1996, vol. 31, issue 1, 41-56

Abstract: We show that with both home and foreign firms present in a market, liberalization of entry could raise or lower welfare. When goods are homogenous, we show that the optimum number of firms depends on the extent to which foreign firms are present. We show that the optimum number of firms exceeds the free entry level if there is enough of a foreign presence as measured by the fraction of foreign firms present in the domestic market. We also show how factors such as the source of entry, home or foreign, the extent of product differentiation within and between home and foreign firms, and the extent of fixed costs affect the desirability of free entry.

JEL-codes: F14 F15 F23 (search for similar items in EconPapers)
Date: 1996
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