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Price‐sensitive demand and market entry
Author(s) -
Gu Yiquan,
Rasch Alexander,
Wenzel Tobias
Publication year - 2016
Publication title -
papers in regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.937
H-Index - 64
eISSN - 1435-5957
pISSN - 1056-8190
DOI - 10.1111/pirs.12165
Subject(s) - microeconomics , outcome (game theory) , industrial organization , unit (ring theory) , business , unit cost , product differentiation , barriers to entry , economics , product (mathematics) , market structure , mathematics education , mathematics , geometry , cournot competition
This paper revisits the optimal entry decision in a differentiated product market where customer demand is price‐sensitive and depends on a per‐unit transport cost. We show that compared to the socially optimal outcome, too few firms may enter when entry costs and transport costs are high.