Country size matters in determining the effectiveness of domestic and foreign competition on pricing behavior in manufacturing. Removing barriers to entry of new firms reduces markups more in large countries, while removing barriers to imports reduces markups more in small countries

Country size matters in determining the effectiveness of domestic and foreign competition on pricing behavior in manufacturing. Removing barriers to the entry of new firms reduces markups more in large countries, while removing barriers to imports reduces markups more in small countries.Actual...

Actual, and potential competition is a powerful source of discipline on the pricing behavior of firms with market power. The authors develop a simple model that shows that the effects of new entry, and import competition on industry price-cost markups, depend on country size. The authors...