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Entry License Tax: Stackelberg versus Cournot

Sususmu Cato () and Toshihiro Matsumura ()

Journal of Institutional and Theoretical Economics (JITE), 2019, vol. 175, issue 2, 258-271

Abstract: This study investigates how leadership affects the optimal public policies that impact entry barriers in markets in which the number of firms is endogenously determined. Specifically, we focus on the relationship between the relative efficiency of an incumbent firm and optimal entry tax (entry barrier). We find that this relationship depends on whether the incumbent can commit to its output level before the entries of new firms. The optimal entry tax decreases (increases) with the productivity of the incumbent when it takes (does not take) leadership. We also find that the optimal entry barrier occurring when the incumbent takes leadership is lower than that when it does not.

Keywords: Stackelberg; Cournot; free entry; entry tax; competition policy; beneficial concentration (search for similar items in EconPapers)
JEL-codes: L41 L51 L13 (search for similar items in EconPapers)
Date: 2019
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Working Paper: Entry-License Tax: Stackelberg versus Cournot (2017) Downloads
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DOI: 10.1628/jite-2019-0015

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