L6 Market entry

Question 1

Answer 1

Question 2

Answer 2

General entry condition

If firm have the same costs & entry doesn’t change competitive conduct, then (sN+1)/sN = 1

Thus, departures of successive entry threshold ratios from one measure whether competitive conduct changes as the number of firms increases

Note: price discrimination and product differentiation could also causeentry threshold ratios to depart from 1

Limitation: The entry threshold ratio doesn’t measure the level of competition, but how the level changes with the number of firms

Question 3

Answer 3