Regulatory Barriers and Entry into a New Competitive Industry

14 Pages Posted: 18 Oct 2013

See all articles by John Bennett

John Bennett

Brunel University London - Economics and Finance; Institute for the Study of Labor (IZA); University of Wales, Swansea - School of Business and Economics; Centre for Economic Policy Research (CEPR)

Saul Estrin

London School of Economics & Political Science (LSE); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Date Written: November 2013

Abstract

We model the effects of license fees and bureaucratic delay on firm entry into a new competitive industry, whose profitability is initially unknown. A license fee alone reduces the number of first movers and the steady‚Äźstate number of firms. The combination of license fee and delay may cause some entrepreneurs to purchase licenses speculatively, only using them to enter production later if profitability is revealed to be sufficiently favourable. Alternatively, some entrepreneurs may wait, possibly buying a license only after profitability is revealed; but it is never found that some entrepreneurs adopt one of these strategies and some the other.

Suggested Citation

Bennett, John and Estrin, Saul, Regulatory Barriers and Entry into a New Competitive Industry (November 2013). Review of Development Economics, Vol. 17, Issue 4, pp. 685-698, 2013. Available at SSRN: https://ssrn.com/abstract=2341951 or http://dx.doi.org/10.1111/rode.12059

John Bennett

Brunel University London - Economics and Finance ( email )

Uxbridge UB8 3PH
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Institute for the Study of Labor (IZA)

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University of Wales, Swansea - School of Business and Economics ( email )

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United Kingdom
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+44 1792 295 872 (Fax)

Centre for Economic Policy Research (CEPR)

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United Kingdom

Saul Estrin

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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