- JAPANESE ECONOMIC ASSOCIATION
- The Economic Studies Quarterly (ISSN:0557109X)
- vol.45, no.2, pp.106-118, 1994-06-20 (Released:2008-02-28)
A big firm is aiming to enter a small and growing market. When should this entry be permitted for the benefit of the consumers and the incumbent firm? We consider this problem in the framework of continuous dynamics. The entrant is a big firm that commits to keep its large level of capital constant. Hence the large firm will have the stronger position in the market compared with the incumbent firm.Given the entry time announced by the government, the incumbent accumulates capital so as to maximize profit over time. Given the optimal dynamic behavior of the firm, the government decides the entry timing.We will deduce the feature of this optimal timing and that the timing becomes earlier (or later) when the government evaluates the consumer's surplus more (or less) relatively to the producer's.