ENTRY REGULATIONS, WELFARE, AND DETERMINANTS OF MARKET STRUCTURE
Welfare effects of entry regulations are theoretically ambiguous in differentiated product markets. We use a dynamic oligopoly model of entry and exit with store-type differentiation and static price setting to evaluate how entry regulations affect long-run profitability, market structure, and welfa...
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Published in | International economic review (Philadelphia) Vol. 59; no. 2; pp. 727 - 756 |
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Main Authors | , |
Format | Journal Article |
Language | English |
Published |
Philadelphia
Wiley Periodicals, Inc
01.05.2018
Blackwell Publishing Ltd |
Subjects | |
Online Access | Get full text |
ISSN | 0020-6598 1468-2354 |
DOI | 10.1111/iere.12286 |
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Abstract | Welfare effects of entry regulations are theoretically ambiguous in differentiated product markets. We use a dynamic oligopoly model of entry and exit with store-type differentiation and static price setting to evaluate how entry regulations affect long-run profitability, market structure, and welfare. Based on unique data for all retail food stores in Sweden, we estimate demand, recover variable profits, and estimate entry costs and fixed costs by store type. Counterfactual policy experiments show that welfare increases when competition is enhanced by lower entry costs. Protecting small stores by imposing licensing fees on large stores is not welfare enhancing. |
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AbstractList | Welfare effects of entry regulations are theoretically ambiguous in differentiated product markets. We use a dynamic oligopoly model of entry and exit with store‐type differentiation and static price setting to evaluate how entry regulations affect long‐run profitability, market structure, and welfare. Based on unique data for all retail food stores in Sweden, we estimate demand, recover variable profits, and estimate entry costs and fixed costs by store type. Counterfactual policy experiments show that welfare increases when competition is enhanced by lower entry costs. Protecting small stores by imposing licensing fees on large stores is not welfare enhancing. |
Author | Orth, Matilda Maican, Florin G. |
Author_xml | – sequence: 1 givenname: Florin G. surname: Maican fullname: Maican, Florin G. – sequence: 2 givenname: Matilda surname: Orth fullname: Orth, Matilda |
BackLink | https://gup.ub.gu.se/publication/268592$$DView record from Swedish Publication Index |
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Copyright | Copyright © 2018 Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association (2018) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association Copyright © 2018 by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association |
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Notes | We would like to thank the editor and two anonymous referees for their excellent comments and suggestions. Furthermore, we thank John Asker, Emek Basker, Christoph Bauner, Gregory Crawford, Uli Doraszelski, Paul Grieco, Igal Hendel, Ariel Pakes, Amil Petrin, Mark Roberts, Philipp Schmidt‐Dengler, Junichi Suzuki, Yuya Takahashi, Otto Toivanen, Frank Verboven, and seminar participants at the Swedish National Conference on Economics, the 13th CEPR/JIE Conference on Applied IO, EEA‐ESEM, EARIE, and IIOC for their valuable comments. Special thanks to DELFI Marknadspartner, the Swedish Consumer Agency, Värderingsdata, and the Swedish National Organization of Pensioners (PRO) for providing the data. Financial support from the Swedish Retail and Wholesale Development Council, Torsten Söderbergs Stiftelse, and the Swedish Competition Authority is gratefully acknowledged. ObjectType-Article-1 SourceType-Scholarly Journals-1 ObjectType-Feature-2 content type line 14 |
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SubjectTerms | Ambiguity Business & Economics competition Costs Differentiation discrete-choice models Economic models Economic theory Economics Economics and Business Ekonomi och näringsliv equilibrium Experiments Fees & charges Fixed costs games land-use regulation Licensing Market structure Markets Oligopoly perfect industry dynamics product differentiation Profitability Profits Regulation retail chains Retail stores Retailing industry social inefficiency wal-mart |
Title | ENTRY REGULATIONS, WELFARE, AND DETERMINANTS OF MARKET STRUCTURE |
URI | https://www.jstor.org/stable/45018871 https://onlinelibrary.wiley.com/doi/abs/10.1111%2Fiere.12286 https://www.proquest.com/docview/2047358253 https://gup.ub.gu.se/publication/268592 |
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