Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/307953 
Year of Publication: 
2023
Citation: 
[Journal:] Review of Industrial Organization [ISSN:] 1573-7160 [Volume:] 63 [Issue:] 1 [Publisher:] Springer US [Place:] New York, NY [Year:] 2023 [Pages:] 21-39
Publisher: 
Springer US, New York, NY
Abstract: 
We analyze the impact of persistent cost heterogeneity of potential firms on free entry equilibria under a Cournot setting. We show that firm heterogeneity always reduces the number of firms in equilibrium, and that vertical and horizontal market growth have different effects on industry population and firm dynamics. Vertical market growth always promotes entry and growth of new firms, but heterogeneity weakens this effect. For horizontal market growth, we identify two growth regimes: incumbents dominate in large markets with significant heterogeneity, while new entrants grow faster in smaller markets with low heterogeneity. In contrast to existing research, we show that higher degrees of heterogeneity among potential firms reduces entry rates in both cases.
Subjects: 
Endogenous market structure
Heterogeneity
Number of firms
Entry rates
Growth of firms
Cournot-nash-equilibria
JEL: 
L1
L11
L22
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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