Economics Dictionary of ArgumentsHome
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| Market entry: Market entry in economics refers to the process by which a company or firm starts operating in a new market. This can involve launching new products, establishing distribution channels, or overcoming barriers like competition, regulation, and capital requirements. Successful market entry strategies aim to gain market share and compete effectively with existing firms. See also Firms, Business, Competition, Markets._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Dictionary of Arguments. | |||
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Paul Krugman on Market Entry - Dictionary of Arguments
Krugman III 101 Market entry/Krugman/Baldwin/Klepper: Large commercial aircraft production is one of the areas in which the States accuses European governments of unfair trade practices. Airbus Indus trie is undoubtedly heavily supported by subsidies from all participating countries. >Subsidies, >Competition, >International trade, >Government policy, >Interventions, >Interventionism, >New trade theory. Market entry: The cause for these payments was the decision of European governments in the late 1960s to support the entry of a European competitor in the market for large transport aircraft. This government-supported market entry and the exchange rate guarantees make it an interesting goal to analyze the strategic trade policy issue of European government intervention. Krugman III 102 One aspect of this competition between European and American producers was examined by Baldwin and Krugman (1988)(1), who developed a simulation model for the entry of the Airbus A300 in the market for medium- to long-range wide-bodied jet aircraft. At that time, Airbus was in an ambiguous situation: it was a new entrant to the overall market for large transport aircraft competing with well-established firms, but it was the first to enter the market segment for which the A300 was designed, whereas deliveries of Boeing’s new 767 started six years later. Baldwin and Krugman explained this situation of being a first-mover and at the same time having little chance to make profits on the A300 by cost differences between Airbus and Boeing-that is, Airbus had an approximately 17 percent higher unit cost at the same scale of production (1988(1),25). This apparent cost disadvantage has been attributed by company officials to accumulated learning effects in the production of other aircraft types. They claim that such economies of scope account for Airbus’s lack of success, hence the decision to develop the A320/321 and A330/340 in order to supply a complete family of aircraft. One purpose of this paper is to look at the effects of the market entry of Airbus by taking into account the complete family of aircraft. The simulation model of Baldwin and Krugman(1) uses government support that essentially supports the fixed costs of start-up investments and thus enables the firm to accept a lower than average profitability or even losses. Direct production subsidies, which have been minor in the past, seem to have become more important with the devaluation of the dollar. If the dollar stays at the fall I990 level there will be substantial subsidies to be paid, at least by the German government. The comparative advantage of the American civil aircraft industry will deteriorate, and political pressures on the U.S. government to retaliate against such policies will increase. The already ongoing dispute about aircraft subsidies will most likely intensify. 1. Baldwin, Richard, and Paul R. Krugman. 1988. Industrial policy and international competition in wide-bodied jet aircraft. In Trade policy issues and empirical analysis, ed. R. E. Baldwin. Chicago: University of Chicago Press. Gernot Klepper. „Industrial Policy in the Transport Aircraft Industry.“ In: Paul Krugman and Alasdair Smith (Eds.) 1994. Empirical Studies of Strategic Trade Policy. Chicago: The University of Chicago Press._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. "Vs" indicates differences in content, not necessarily the chronological progression of a controversy. If a German edition is specified, the page numbers refer to this edition. |
EconKrug I Paul Krugman Volkswirtschaftslehre Stuttgart 2017 EconKrug II Paul Krugman Robin Wells Microeconomics New York 2014 Krugman III Paul Krugman Alasdair Smith Empirical Studies of Strategic Trade Policy Chicago: The University of Chicago Press 1994 |
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