OURA Asuka   Faculty of Economics Department of Socio-Economics   Associate Professor

■ Title   Deregulation: Why We Should Sometimes Welcome Even Low-Quality Firms

■ Outline   The quality of newly invented goods or services can only be assessed after they have been in use for a significant period. This applies to both high-quality and low-quality products---typically, the former survive, whereas the latter become obsolete in the market, resulting in resource wastage. We investigate this situation by developing a general equilibrium model. In a competitive market equilibrium, when the entry cost is relatively high compared to the research and development costs, only high-quality firms enter the market, ensuring efficiency. However, when the entry cost is low, low-quality firms enter the market, resulting in inefficiency. In this case, although entry regulations may exclude low-quality firms, they also reduce market competition and increase labor cost, leading to the decrease in economic welfare.   Asuka Oura   Single   SSRN Working Paper Series   (4393284),pp.1   2023/03

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