Endogenous cost asymmetry and insufficient entry in the absence of scale economies

The paper by Ghosh and Saha (Econ Theory 30:575–586, 2007) shows that entry can be socially excessive even if there are no scale economies. We show that exogenous cost asymmetry is responsible for this result. In a simple model with R&D investment by the more cost efficient firm, thus creating endogenous cost asymmetry, we show that entry is socially insufficient instead of excessive if the slope of the marginal cost of R&D is not very high.