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Social efficiency of entry in a vertically related industry

Basak, Debasmita; Mukherjee, Arijit

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Abstract

We provide a new perspective to the literature on social desirability of entry by showing that, if the input supplier has market power, social desirability of entry of the final goods producers depends on returns to scale. Entry in the final goods market can be socially insufficient under constant returns to scale technology, but it can be socially excessive under decreasing returns to scale technologies if the cost of entry is low so that the final goods market is sufficiently competitive. Hence, the anti-competitive entry regulation policies are more justifiable if the final goods market is characterised by decreasing returns to scale technologies.

Journal Article Type Article
Publication Date Feb 1, 2016
Journal Economics Letters
Print ISSN 0165-1765
Electronic ISSN 0165-1765
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 139
APA6 Citation Basak, D., & Mukherjee, A. (2016). Social efficiency of entry in a vertically related industry. Economics Letters, 139, https://doi.org/10.1016/j.econlet.2015.12.003
DOI https://doi.org/10.1016/j.econlet.2015.12.003
Keywords Excess entry; Insufficient entry; Decreasing returns to scale
Publisher URL http://www.sciencedirect.com/science/article/pii/S0165176515005121
Copyright Statement Copyright information regarding this work can be found at the following address: http://creativecommons.org/licenses/by-nc-nd/4.0

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Copyright Statement
Copyright information regarding this work can be found at the following address: http://creativecommons.org/licenses/by-nc-nd/4.0





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