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Cover of: Entry License Tax: Stackelberg versus Cournot
Susumu Cato, Toshihiro Matsumura

Entry License Tax: Stackelberg versus Cournot

Section: Articles
Volume 175 (2019) / Issue 2, pp. 258-271 (14)
Published 21.12.2018
DOI 10.1628/jite-2019-0015
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  • 10.1628/jite-2019-0015
Summary
This study investigates how leadership affects the optimal public policies that impact entry barriers in markets in which the number of firms is endogenously determined. Specifically, we focus on the relationship between the relative efficiency of an incumbent firm and optimal entry tax (entry barrier). We find that this relationship depends on whether the incumbent can commit to its output level before the entries of new firms. The optimal entry tax decreases (increases) with the productivity of the incumbent when it takes (does not take) leadership. We also find that the optimal entry barrier occurring when the incumbent takes leadership is lower than that when it does not.