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on Entrepreneurship |
| By: | Arijit Mukherjee; Laixun Zhao |
| Abstract: | Common wisdom suggests that entry reduces profits of the incumbent firms. On the contrary, we show that if the incumbents differ in marginal costs and the entrants behave like Stackelberg followers, entry may benefit the incumbents who are relatively cost efficient while it always hurts the cost inefficient incumbents. However, the outputs of all incumbents may be higher under entry. |
| Keywords: | Entry; Profit; Stackelberg Competition |
| URL: | http://d.repec.org/n?u=RePEc:not:notecp:08/01&r=ent |
| By: | Paula Sarmento (CETE and Faculty of Economics, University of Porto); António Brandão (CETE and Faculty of Economics, University of Porto) |
| Abstract: | In this paper we compare the costs of two regulatory policies about the entry of new firms. We consider an incumbent firm that has more information about the market demand than the regulator. Then, the incumbent firm can use this advantage to persuade the regulator to make entry more difficult. With the first regulatory policy the regulator uses the incumbent price pre-regulation to get information about the demand. With the second regulatory policy the regulator design a mechanism to motivate the incumbent firm to price truthfully. We conclude that, for enough high values of the probability of low demand, the welfare is higher with the second (more active) regulatory policy. |
| Keywords: | asymmetric information, entry regulation, signalling, adverse selection |
| JEL: | C73 D82 L13 L51 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:por:cetedp:0802&r=ent |
| By: | Márcia Siqueira Rapini (Cedeplar-UFMG) |
| Abstract: | This working paper is an initial effort to analyze theoretical contributions from New Institutional Economics (NEI), specially the Transaction Costs framework, for understanding financial mechanisms to innovation. Transaction Costs economy is one hand from firm’s contractual theories that allows investigating how resources are allocated inside the firms. For the purpose of the paper, it will be analyze resource’s allocation for innovative activities that embraces uncertainly, asymmetric information and high risk. |
| JEL: | D86 O31 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:cdp:texdis:td331&r=ent |