Foreign penetration and undesirable competition

Leonard F.S. Wang and Jen-yao Lee

Economic Modelling, 2013, vol. 30, issue C, 729-732

Abstract: This paper examines how the order of the firms' moves affects the social efficiency with foreign ownership and free entry in a mixed oligopoly market. We firstly show that when the foreign shareholding ratio is low, the entry of private followers will lead to a lower consumer welfare and higher social welfare, while the profit of the incumbent nationalized firm is higher under entry than under no entry. Further, we find that there always exists the problem of excessive entry under public leadership regardless of the degree of foreign ownership. Such result is generated by the complementary role played by the leading public firm and the strength of business-stealing effect. Our results thus have important implications for industrial and market-opening policies.

Keywords: Mixed oligopoly; Stackelberg competition; Free entry; Excessive entry (search for similar items in EconPapers)
JEL-codes: C72 H42 L3 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:30:y:2013:i:c:p:729-732

DOI: 10.1016/j.econmod.2012.11.007

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