Market size, entry costs and free entry Cournot equilibrium

Krishnendu Dastidar and Sugata Marjit

Journal of Economics, 2022, vol. 136, issue 2, No 1, 97-114

Abstract: Abstract We consider a free entry, symmetric cost, Cournot equilibrium in a homogeneous product market. There is a parameter A which is the index of the “market size” . If a firm decides to enter, it must incur set-up costs of F. We explore the following question: How do the number of firms, individual output and total output in a free entry equilibrium change with an increase in the market size and entry cost? Conventional wisdom suggests that these should increase with A and decrease with F. However, we show this may not be true. We use the implicit function theorem to provide a complete characterization. We also illustrate our results with specific examples.

Keywords: Free entry; Cournot; Output; Firms (search for similar items in EconPapers)
JEL-codes: D4 L13 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:136:y:2022:i:2:d:10.1007_s00712-021-00769-1

DOI: 10.1007/s00712-021-00769-1

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