Free entry and social inefficiency under co-opetition

Keisuke Hattori and Takeshi Yoshikawa ()
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Takeshi Yoshikawa: University of Hyogo

Journal of Economics, 2016, vol. 118, issue 2, No 1, 97-119

Abstract: Abstract We investigate the social desirability of free entry under co-opetition where firms compete in a homogeneous product market while sharing common property resources that affect industry-wide demand. Our findings indicate that free entry leads to socially excessive or insufficient market entry, depending on the commitment of investment in common property resources. In the non-commitment case, where quantities and investment are simultaneously chosen, there is a possibility of insufficient entry. However, in the pre-commitment case, where investment is chosen at a prior stage, free entry leads to excess entry and a reduction in common property resources. Interestingly, in this case, the excess entry results of Mankiw and Whinston (RAND J Econ 17:48–58, 1986) hold even without entry costs or economies of scale. These results have important policy implications for entry regulation.

Keywords: Excess entry; Free entry; Entry regulations; Common property resources (search for similar items in EconPapers)
JEL-codes: D43 L13 L51 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (9)

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Working Paper: Free Entry and Social Inefficiency under Co-opetition (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:118:y:2016:i:2:d:10.1007_s00712-015-0469-x

DOI: 10.1007/s00712-015-0469-x

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