The relative price discipline of domestic versus foreign entry

Abstract

In this paper we combine data on industry entry, imports, and producer price indexes for 46 4-digit SIC industries over the 1972 to 1987 period to determine the impact of entry on industry pricing. Domestic entry's restraining influence is weak and occurs only at high levels of concentration while import changes exhibit a procompetitive influence for lower levels of concentration that include nearly all industries in the sample. In addition, the threat of foreign entry plays a role in disciplining domestic pricing; the impact of nontariff barriers on price changes seems to increase with concentration levels.