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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Economic Theories on Market Entry - Dictionary of Arguments
Henderson I 85 Market Entry/regulation/economic theories/Henderson/Globerman: The idea that regulators primarily engage in cross-subsidization rather than address suspected market failures is now a firmly established idea among academics and others who study regulation. It has received much empirical support, (…). >Regulation/Peltzman, >Regulation/Hilton, >Regulatory economics, >Market failure. Market entry: This entry by new competitors would drive down prices in that segment of the market. That would, in turn, reduce, and ultimately eliminate, the net revenues used by the regulator to subsidize high-cost customers through relatively Iow prices. Hence, a ubiquitous feature of regulation is barriers to new firm entry set by the regulator. Henderson I 86 Calls for such barriers frequently arise from existing regulated firms. The reason is that they're stuck serving unprofitable segments and they need to generate higher profits on the Iower-cost segments. The only way they can do so is if regulators protect them from competition in those segments. The inevitable result is that much time and money are spent on legal and lobbying efforts by both would-be entrants and incumbents. Furthermore, delays occur in the introduction of new goods and services, as well as in more effcient ways of providing the regulated service in question. This harms the Iower-cost consumers and even, in some cases, all consumers. - - - Krugman III 197 Market entry/economic theories/Rodrik: Perceived product quality is an important component of demand for such products; to be judged high-quality by consumers, entrants must invest in reputation or other means of communicating quality. The problem is even more serious for firms from developing countries, as they may have to surmount a reputation for shoddy quality frequently associated with developing-country goods.’ Such informational barriers to entry have been the subject of a number of theoretical papers. In the simplest framework, one could imagine that (foreign) consumers’ familiarity with quality increases with cumulated exposure to the product in question. Provided the actual quality level of home exports exceeds the perceived level, there may then be a role for export subsidies in speeding up the process of product familiarization (Mayer 1984)(1). When domestic firms are differentiated by quality, high-end firms can try to signal quality by selling at low prices initially (in anticipation of future profits); subsidies can facilitate such signaling strategies, at an overall welfare gain to the home economy (Bagwell and Staiger 1989(2)). But the problem is that subsidies may also encourage additional domestic firms to enter at the low end of the quality spectrum, failing to improve the perceived quality of home exports and increasing the cost to high-quality producers of distinguishing themselves from their low-quality counterparts (Grossman and Horn 1988)(3). In all these cases, the transition to higher-quality products is hampered by informational entry barriers. These papers do not consider directly the importance of domestic market structure in determining the average level of product quality in exports. A recent article by Chiang and Masson (1988)(4), motivated specifically by policy discussions in Taiwan, focuses on this issue in the context of a simple modelof reputational externalities in product quality. Their basic point is that concentrated industries will do a better job of internalizing these and that they will therefore tend to produce at the higher end of the quality spectrum. 1. Mayer, Wolfgang. 1984. The infant-export industry argument. Canadian Journal of Economics 17:249-69. 2. Bagwell, Kyle, and Robert Staiger. 1989. A role for export subsidies when product quality is unknown. Journal of International Economics 27:69-89. 3. Grossman, Gene, and Henrik Horn. 1988. Infant-industry protection reconsidered: The case of informational barriers to entry. Quarterly Journal of Economics 103:767-87. 4. Chiang, Shih-Chen, and Robert Masson. 1988. Domestic industrial structure and export quality. International Economic Review 29:26 1-70. Dani Rodrik. „Industrial Organization and Product Quality: Evidence from South Korean and Taiwanese Exports.“ 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. |
Economic Theories Henderson I David R. Henderson Steven Globerman The Essential UCLA School of Economics Vancouver: Fraser Institute. 2019 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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