Chapter 8

Undesirable Free Entry in Oligopoly with Foreign Competitors

Chu-Chuan Hsu, Jen-Yao Lee and Leonard F.S. Wang

Abstract

Will the order of public firm’s moves affect the social efficiency of free entry in a mixed oligopoly market? In this chapter, we first show that in a closed economy, private entry is socially excessive regardless of the firm’s order of move. We then show that in an open economy, socially excessive of domestic private entry remains hold regardless of the firm’s order of move if the trade cost of foreign competitors is higher enough to deter foreign entry. Our excessive entry results found in the presence of public firm and market leaders have important implications for anti-competitive regulation policy and policy coordination between domestic and foreign governments.

Total Pages: 127-143 (17)

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