Abstract
This study examines the effects of quantitative restrictions on foreign firms' entry into a domestic industry. Foreign firms' investment policy and the equilibrium value of their entry right are studied under various rationing and rent-extracting schemes. When foreign firms are left free to compete for the scarcity rents induced by a quota, their policy exhibits a suboptimal ‘rent run’: entry occurs at the optimal pace only until a threshold level of investment is reached; the last group of firms enters early and dumps output at below marginal cost.
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