Social Efficiency of Entry in an Open Economy

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We show that cost asymmetry between the domestic and foreign firms is not necessary for the occurrence of insufficient entry in the domestic country. This result provides a rationale for pro-competitive domestic policies even in the absence of cost asymmetries among the domestic and foreign firms. However, if significant demand comes from foreign countries, and the market structures are determined endogenously in the domestic and foreign countries, domestic-entry in an open economy might not be insufficient, implying that foreign competition might not reduce the importance of anti-competitive domestic policies.

Bibliographical metadata

Original languageEnglish
Pages (from-to)203-219
Number of pages17
JournalB.E. Journal of Economic Analysis and Policy
Issue number1
Early online date29 Dec 2021
Publication statusPublished - 1 Jan 2022