Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/268732
Year of Publication: 
2023
Series/Report no.: 
IAAEU Discussion Paper Series in Economics No. 01/2023
Publisher: 
University of Trier, Institute for Labour Law and Industrial Relations in the European Union (IAAEU), Trier
Abstract: 
Entry in a homogeneous Cournot-oligopoly is excessive if there is business stealing. This prediction assumes that production costs reduce profits and welfare equally. However, this need not be the case. If there is asymmetric information, suppliers or employees can utilize their superior knowledge to extract informational rents. Rent payments reduce profits and deter entry, but affect neither the optimal number of firms nor welfare directly. Therefore, entry becomes insufficient if informational rents are large enough. In the context of a moral hazard model, we show that insufficient entry occurs if entry costs are sufficiently high. Such costs lower the number of firms and, thereby, raise informational rents.
Subjects: 
Oligopoly
excessive entry
informational rents
moral hazard
JEL: 
D43
D82
L51
Document Type: 
Working Paper

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