Social efficiency of entry in a vertically related industry

Debasmita Basak and Arijit Mukherjee

Economics Letters, 2016, vol. 139, issue C, 8-10

Abstract: We provide a new perspective to the literature on social desirability of entry by showing that, if the input supplier has market power, social desirability of entry of the final goods producers depends on returns to scale. Entry in the final goods market can be socially insufficient under constant returns to scale technology, but it can be socially excessive under decreasing returns to scale technologies if the cost of entry is low so that the final goods market is sufficiently competitive. Hence, the anti-competitive entry regulation policies are more justifiable if the final goods market is characterised by decreasing returns to scale technologies.

Keywords: Excess entry; Insufficient entry; Decreasing returns to scale (search for similar items in EconPapers)
JEL-codes: L13 L40 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:139:y:2016:i:c:p:8-10

DOI: 10.1016/j.econlet.2015.12.003

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