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Welfare Analysis of Free Entry in a Dynamic General Equilibrium Model

Author

Listed:
  • Koichi Futagami

    (Graduate School of Economics, Osaka University)

  • Tatsuro Iwaisako

    (Graduate School of Economics, Osaka University)

  • Makoto Okamura

    (Economics Department, Hiroshima University)

Abstract

This paper presents a welfare analysis of free entry equilibrium in dynamic general equilibrium environments with oligopolistic competition. First, we show that a marginal decrease in the number of firms at the free entry equilibrium improves social welfare. Second, we show that if a government can control the number of entrants intertemporally so as to maximize the level of social welfare, the number of entrants under free entry may be less than the second-best number of entrants. Capital accumulation plays an important role in determining whether excess entry occurs.

Suggested Citation

  • Koichi Futagami & Tatsuro Iwaisako & Makoto Okamura, 2011. "Welfare Analysis of Free Entry in a Dynamic General Equilibrium Model," Discussion Papers in Economics and Business 11-20, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:1120
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    File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/1120.pdf
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    References listed on IDEAS

    as
    1. Dos Santos Ferreira, Rodolphe & Lloyd-Braga, Teresa, 2005. "Non-linear endogenous fluctuations with free entry and variable markups," Journal of Economic Dynamics and Control, Elsevier, vol. 29(5), pages 847-871, May.
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    More about this item

    Keywords

    Excess entry; Oligopolistic competition; Dynamic general equilibrium;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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