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Switching Costs and the foreign Firm's Entry

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  • Kikuchi, Toru

Abstract

This paper considers a two-period model of market entry with homogeneous products and switching costs. It is shown that the pro-competitive effect of a foreign firm's entry (i.e., unilateral trade liberalization) emerges before the entry. Also, conditions that are conducive to a competitive environment in the second-period are shown to yield a less competitive outcome in the first-period. That is, when the marginal cost of the foreign entrant is relatively low, the first-period output of a domestic monopolist is relatively low as well.

Suggested Citation

  • Kikuchi, Toru, 2008. "Switching Costs and the foreign Firm's Entry," MPRA Paper 8093, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:8093
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    References listed on IDEAS

    as
    1. To, Theodore, 1994. "Export subsidies and oligopoly with switching costs," Journal of International Economics, Elsevier, vol. 37(1-2), pages 97-110, August.
    2. repec:ebl:ecbull:v:6:y:2007:i:6:p:1-7 is not listed on IDEAS
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    More about this item

    Keywords

    Switching Costs; Foreign Firm's Entry;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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