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Profit Raising Entry

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  • 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.
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Suggested Citation

  • Arijit Mukherjee & Laixun Zhao, 2017. "Profit Raising Entry," Journal of Industrial Economics, Wiley Blackwell, vol. 65(1), pages 214-219, March.
    • Handle: RePEc:bla:jindec:v:65:y:2017:i:1:p:214-219
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