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Article: Trigger-point mechanism and conditional commitment: Implications for entry, collusion, and welfare

TitleTrigger-point mechanism and conditional commitment: Implications for entry, collusion, and welfare
Authors
Issue Date2007
Citation
Contemporary Economic Policy, 2007, v. 25 n. 2, p. 156-169 How to Cite?
AbstractWhen fixed, sunk investment costs are high, firms may not have sufficient incentive to enter the market unless future entry is constrained. In this case, the government faces a dilemma between a full commitment and noncommitment of restricted future entry. A way out is to consider a commitment conditional on the realization of the uncertain parameters, such as the trigger-point mechanism (TPM) that sets conditions on current production level, excess capacity, and demand growth under which future entry will be allowed. This article shows that the TPM facilitates the incumbents' collusion but may improve social welfare under certain circumstances. (JEL L13, L43, L50, H10, H54). © 2007 Western Economic Association International.
Persistent Identifierhttp://hdl.handle.net/10722/177744
ISSN
2015 Impact Factor: 0.602
2015 SCImago Journal Rankings: 0.424
References

 

DC FieldValueLanguage
dc.contributor.authorQiu, LDen_US
dc.contributor.authorCheng, LKen_US
dc.contributor.authorFung, MKen_US
dc.date.accessioned2012-12-19T09:39:47Z-
dc.date.available2012-12-19T09:39:47Z-
dc.date.issued2007en_US
dc.identifier.citationContemporary Economic Policy, 2007, v. 25 n. 2, p. 156-169en_US
dc.identifier.issn1074-3529en_US
dc.identifier.urihttp://hdl.handle.net/10722/177744-
dc.description.abstractWhen fixed, sunk investment costs are high, firms may not have sufficient incentive to enter the market unless future entry is constrained. In this case, the government faces a dilemma between a full commitment and noncommitment of restricted future entry. A way out is to consider a commitment conditional on the realization of the uncertain parameters, such as the trigger-point mechanism (TPM) that sets conditions on current production level, excess capacity, and demand growth under which future entry will be allowed. This article shows that the TPM facilitates the incumbents' collusion but may improve social welfare under certain circumstances. (JEL L13, L43, L50, H10, H54). © 2007 Western Economic Association International.en_US
dc.languageengen_US
dc.relation.ispartofContemporary Economic Policyen_US
dc.titleTrigger-point mechanism and conditional commitment: Implications for entry, collusion, and welfareen_US
dc.typeArticleen_US
dc.identifier.emailQiu, LD: larryqiu@hku.hken_US
dc.identifier.authorityQiu, LD=rp01093en_US
dc.description.naturelink_to_subscribed_fulltexten_US
dc.identifier.doi10.1111/j.1465-7287.2006.00028.xen_US
dc.identifier.scopuseid_2-s2.0-34247866286en_US
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-34247866286&selection=ref&src=s&origin=recordpageen_US
dc.identifier.volume25en_US
dc.identifier.issue2en_US
dc.identifier.spage156en_US
dc.identifier.epage169en_US
dc.publisher.placeUnited Statesen_US
dc.identifier.scopusauthoridQiu, LD=7201538008en_US
dc.identifier.scopusauthoridCheng, LK=7403337020en_US
dc.identifier.scopusauthoridFung, MK=34881816900en_US

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