INSUFFICIENT ENTRY OF EMPLOYEE‐CONTROLLED FIRMS IN A FREE‐ENTRY OLIGOPOLY |
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Authors: | Kojun HAMADA Takao OHKAWA Makoto OKAMURA |
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Institution: | 1. Niigata University, Niigata, JapanThis study was supported by JSPS KAKENHI Grant Numbers 16K03615 and 16H03612 (Hamada), 17K03734 (Ohkawa), 16K03658 (Okamura), and 15K03492, 15K03436, and 15K03370 (Ohkawa and Okamura). The usual disclaimer applies. E‐mail:;2. Ritsumeikan University, Shiga, Japan;3. Gakushuin University and Hiroshima University, Tokyo and Hiroshima, Japan |
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Abstract: | This study is a theoretical examination of whether employee‐controlled firms (ECFs) enter a free‐entry oligopolistic market excessively or insufficiently, from the viewpoint of welfare maximization. The excess entry theorem is well known in oligopoly theory. According to this theorem, a greater number of profit‐maximizing firms enter a free‐entry oligopolistic market than is optimal for welfare maximization. We demonstrate the possibility that insufficient entry arises when ECFs compete in a free‐entry market. In particular, we show that if both the demand and cost functions are convex, insufficient ECF entry necessarily occurs. Our results suggest that competition among firms seeking purposes other than profit might lead to insufficient entry because differences in competing firms’ objectives affect the intensity of market competition. |
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Keywords: | Employee‐controlled firm free entry insufficient entry excess entry theorem entry promotion D43 L13 L21 L51 |
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