The Effect of Asymmetric Entry Costs on Bertrand Competition (Paperback) (ISBN-13: 9781523326587)

By permitting firms to have different entry costs, I generalize two previously studied models of two-stage entry and pricing amongst Bertrand competitors. I find that the existing results depend critically on the symmetry assumption. For example, if firms' entry decisions are observed before price-setting occurs, then total welfare can increase following the introduction of a potential entrant, in contrast to the unambiguous welfare reduction found in the symmetric setting. If firms' entry decisions are unobserved before pricing-setting occurs, then the expected price typically decreases or remains unchanged following the introduction of a potential entrant, in contrast to the unambiguous price increase found in the symmetric setting. In both price-setting environments, competition increases following the introduction of potential entrants with sufficiently low entry costs, a finding that is obscured by focusing on the symmetric models.

Author: Penny Hill Press Inc,Federal Trade Commission
ISBN-10: 1523326581
ISBN-13: 9781523326587
Publisher: Createspace Independent Publishing Platform
Language: English
Published: 01/10/2016
Pages: 26
Format: Paperback
Weight: 0.19lbs
Size: 11.02h x 8.50w x 0.05d