External Economies of Scale and Insufficient Entry

  title={External Economies of Scale and Insufficient Entry},
  author={Arijit Mukherjee},
  journal={Journal of Industry, Competition and Trade},
  • A. Mukherjee
  • Published 26 February 2010
  • Economics
  • Journal of Industry, Competition and Trade
Empirical evidence suggests that many industries are characterized by external economies of scale, yet the literature on the welfare effects of entry has ignored this aspect. We show that entry can be insufficient instead of excessive in the presence of external economies of scale. Using an example with specific demand and cost functions and Cournot competition, we show that insufficient entry occurs for any positive cost of entry and the possibility of insufficient entry increases with a… 
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