Imports and domestic entry: an empirical study

The objectives of this study are twofold: (a) to investigate the influence of imports on domestic entrants and to see whether indeed imports have a deterring effect on potential entrants; and (b) to determine whether the common finding of a weakly negative, or even nonnegative, impact of imports on domestic firms' profitability can be attributed to imports' inhibiting effect on potential entrants. A reduction or removal of the threat of domestic entry enables existing firms to raise prices, therefore, this effect may partly counter the procompetitive, price reducing effect of imports on domestic oligopolistic markets.