Free entry and social inefficiency under co-opetition

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, depend...

Full description

Saved in:
Bibliographic Details
Published in:Journal of economics (Vienna, Austria) Austria), 2016-06, Vol.118 (2), p.97-119
Main Authors: Hattori, Keisuke, Yoshikawa, Takeshi
Format: Article
Language:English
Subjects:
Business entities
Cellular telephones
Common property ownership
Common property resources
Competition
Coopetition
Cost of entry
Costs
Economic models
Economic theory
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Economies of scale
Elasticity of demand
Free entry
Game Theory
Investment decisions
Investment value
Lobbying
Macroeconomics/Monetary Economics//Financial Economics
Market entry
Microeconomics
Product image
Product safety
Public Finance
Public investments
Social and Behav. Sciences
Studies
Tourism
Willingness to pay
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary: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.
ISSN:0931-8658
1617-7134
DOI:10.1007/s00712-015-0469-x