Welfare Analysis of Free Entry in a Dynamic General Equilibrium Model

Koichi Futagami, Tatsuro Iwaisako and Makoto Okamura ()
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Makoto Okamura: Economics Department, Hiroshima University

No 11-20, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This paper presents a welfare analysis of free entry equilibrium in dynamic general equilibrium environments with oligopolistic competition. First, we show that a marginal decrease in the number of firms at the free entry equilibrium improves social welfare. Second, we show that if a government can control the number of entrants intertemporally so as to maximize the level of social welfare, the number of entrants under free entry may be less than the second-best number of entrants. Capital accumulation plays an important role in determining whether excess entry occurs.

Keywords: Excess entry; Oligopolistic competition; Dynamic general equilibrium (search for similar items in EconPapers)
JEL-codes: D43 L50 O41 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2011-05
New Economics Papers: this item is included in nep-bec, nep-com and nep-dge
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Persistent link: https://EconPapers.repec.org/RePEc:osk:wpaper:1120

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