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The journal article on ‘Free entry and social efficiency”

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Some suggestions for reviewing a journal article

You have to write a critical review of the article, and NOT just a summary of the article.

You may organise your review in the following way:

      Provide information about the article, such as title, author, name of the journal, year of publication, etc.

      Provide a clear summary of the article by discussing the issues such as the motivation or main purpose of the article, the methods used for the analysis, the main findings of the analysis, the economic reasons for the results and the contributions to the literature.

      Write a critical evaluation of the article. For example, you may do the following wherever applicable: discuss how important are the issues discussed, how relevant are the methods used, how important are the results compared to the existing literature, are the results driven by some crucial assumptions and if so, how sensible are the assumptions, what are the limitations of the analysis, how the analysis could be extended to incorporate some ignored aspects of the economy and what possible results we may expect from this extension, is there any paper that already extended the analysis.

      Discuss the strengths as well as the weaknesses.

      When you are providing critical arguments, e.g., discussing how different assumptions or economic aspects which have been ignored in the article may affect the findings, always support your arguments with evidences, such as citing other articles or books. Always try to cite academic references rather than web addresses.

      Summarise your review with an overall assessment and mention how it helped to improve our understanding of the topic.

It may be useful to ask the following questions when reviewing:

What are the research questions?

Why is it important to consider these questions?

What are the methods used to analysis the problem? Are these methods reasonable?

What are the results? Are these results sensible?

What are the reasons for the results?

How important are the results compared to the existing literature?

What are the issues ignored in this article? How the results may change if we include certain ignored aspects? Are there papers which already extended the analysis?

What are the overall contributions of the article? How did it increase our knowledge about the subject?

The following link may be useful: https://academicskills.anu.edu.au/node/492



The journal article on ‘Free entry and social efficiency”



Word count: 1420

The journal article on ‘Free entry and social efficiency” was written by Gregory Mankiw and Michael Whinston, it was published in 1986 by Wiley on behalf of the Rand Corporation. The authors were inspired by the writings and findings of previous articles that researched and compiled evidence on the existence of the possibility of socially inefficient levels that affects firms trying to enter new markets. According to Mankiw and Whinston (1986, p. 48), this article focuses on the identification of fundamental and spontaneous forces that affect and influence entrant firms. The entry in a market results in the already existing firms to act by reducing production levels; entry is desired more by entrant firms as compared to the incumbent firms. The authors argue that the biases regarding entry results in the depiction of tendencies towards excessive entry, most especially in homogeneous product markets. Besides, the article examines the role played by integer constraint as well as product diversity on both entrant and incumbent firms. Mankiw and Whinston (1986, p. 48) state that “economists typically presume that free entry is desirable for social efficiency,” notably because the underlying economic forces of entry biases remain somewhat mysterious. 

            The primary purpose of this journal article is to investigate the fundamental economic forces that determine whether the free-entry of firms is excessive, insufficient, or optimal. Further, it addresses the question of the conditions that influence the establishment of entry bias, by focusing on the outcome realized after post-entry phase. The method of analysis in this article is based on the comparison of the entrant firms during free entry of a specific number of socially acceptable firms by a social planner who fails to control those firms after initial entry. The analysis method is highly reasonable as it focuses on comparing the specific firms desired by a welfare-maximizing social planner with the particular entrants firm entering the market freely (Manhiw & Whinston, 1986, p. 50). A two-stage game supports this analysis. As a consequence, the authors try to put into consideration the most straightforward way of coming up with a welfare-maximizing number of firms bearing in mind their non-competitiveness after entry.

The importance of this research questions is that the authors get to focus on the development of a post-entry game model to determine how free entry is desirable for social efficiency. Ahlbrecht and Eckhert (2013, p. 638) argue that this approach is advantageous as it explains the forces behind entry biases as well as provide ways that can be used to check the entry biases. The main findings of this article based on the two-stage post entry game model are very sensible. The results of using the model to investigate the effect of homogenous product markets and product diversity on the direction of free entry indicate that it a must for entrant firms to incur costs during entry. A maximizing welfare number of firms do not result from free entry. These findings contribute significantly to economic literature as they reveal that economists hold the hope that set-up costs would reduce thus effectively removing the entry regulations. These findings depict a connection with the already existing literature that supports that as efficiency decreases as free-entry equilibrium converges to a first-best allocation.

            A critical assessment on the journal article reveals that the authors’ utilized crucial assumptions in concluding their findings. The first assumption stipulates how the post-entry equilibrium aggregate...


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