Abstract

http://ssrn.com/abstract=969098
 
 

References (24)



 


 



Trigger-Point Mechanism and Conditional Commitment: Implications for Entry, Collusion, and Welfare


Larry D. Qiu


Hong Kong University of Science & Technology - Department of Economics

Leonard K.H. Cheng


Hong Kong University of Science & Technology - Department of Economics

Michael K. Fung


Hong Kong Polytechnic University - School of Accounting & Finance


Contemporary Economic Policy, Vol. 25, No. 2, pp. 156-169, April 2007

Abstract:     
When 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.

Number of Pages in PDF File: 14

Accepted Paper Series


Date posted: March 9, 2007  

Suggested Citation

Qiu, Larry D. and Cheng, Leonard K.H. and Fung, Michael K., Trigger-Point Mechanism and Conditional Commitment: Implications for Entry, Collusion, and Welfare. Contemporary Economic Policy, Vol. 25, No. 2, pp. 156-169, April 2007. Available at SSRN: http://ssrn.com/abstract=969098 or http://dx.doi.org/10.1111/j.1465-7287.2006.00028.x

Contact Information

Larry Dongxiao Qiu (Contact Author)
Hong Kong University of Science & Technology - Department of Economics ( email )
Clear Water Bay
Kowloon, Hong Kong
China
HOME PAGE: http://www.bm.ust.hk/~larryqiu/
Leonard K.H. Cheng
Hong Kong University of Science & Technology - Department of Economics ( email )
Clear Water Bay
Kowloon, Hong Kong
China
Michael K. Fung
Hong Kong Polytechnic University - School of Accounting & Finance ( email )
Hung Hom, Kowloon
Hong Kong
Feedback to SSRN


Paper statistics
Abstract Views: 407
Downloads: 12
References:  24

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo1 in 0.281 seconds