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International Economic Review

Entry Regulations, Welfare and Determinants of Market Structure

Scientific Article in English
Reference
Maican, Florin and Matilda Orth (2018). “Entry Regulations, Welfare and Determinants of Market Structure”. International Economic Review 59(2), 727–756. doi.org/10.1111/iere.12286

Authors
Florin Maican, Matilda Orth

Welfare effects of entry regulations are theoretically ambiguous in differentiated product markets. We use a dynamic oligopoly model of entry and exit with store‐type differentiation and static price setting to evaluate how entry regulations affect long‐run profitability, market structure, and welfare. Based on unique data for all retail food stores in Sweden, we estimate demand, recover variable profits, and estimate entry costs and fixed costs by store type. Counterfactual policy experiments show that welfare increases when competition is enhanced by lower entry costs. Protecting small stores by imposing licensing fees on large stores is not welfare enhancing.

Florin Maican

+46 (0)31 786 4866
+46 (0)76 235 3039
florin.maican@ifn.se

Matilda Orth

+46 (0)8 665 4531
+46 (0)736 42 38 24
matilda.orth@ifn.se