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Working Paper No. 1102

Entry Regulations, Welfare and Determinants of Market Structure

Working Paper
Reference
Maican, Florin and Matilda Orth (2015). “Entry Regulations, Welfare and Determinants of Market Structure”. IFN Working Paper No. 1102. Stockholm: Research Institute of Industrial Economics (IFN).

Authors
Florin Maican, Matilda Orth

We use a dynamic oligopoly model of entry and exit with store-type differentiation to evaluate how entry regulations affect profitability, market structure and welfare. Based on unique data for all retail food stores in Sweden, we estimate demand, recover variable profits, and estimate entry costs and fixed costs by store type. Counterfactual policy experiments show that welfare increases when competition is enhanced by lower entry costs. Protecting small stores by imposing licensing fees on large stores is not welfare enhancing. This study sheds light on the long-run implications of entry regulations for the welfare of differentiated product industries with endogenous entry and exit.

Florin Maican

+46 (0)31 786 4866
+46 (0)76 235 3039
florin.maican@ifn.se

Matilda Orth

+46 (0)8 665 4531
+46 (0)736 42 38 24
matilda.orth@ifn.se