Journal ArticleDOI
Product diversification, entry prevention and limit pricing
Takashi Omori,George Yarrow +1 more
TLDR
In this article, the authors considered a multiproduct market in which an established firm faces an unlimited number of potential competitors, and all firms have identical cost functions exhibiting scale economies, and they showed that, if von Stackelberg leadership is feasible, the established firm's profit-maximizing strategy will always involve entry deterrence.Abstract:
This article considers a multiproduct market in which an established firm faces an unlimited number of potential competitors, and all firms have identical cost functions exhibiting scale economies. It is shown that, if von Stackelberg leadership is feasible, the established firm's profit-maximizing strategy will always involve entry deterrence. The characteristics of alternative entry deterring policies are outlined. For a two-good model, it is argued that product diversification is a feature of optimal strategies when substitutability in demand between the goods is relatively low. This will (will not) be coupled with limit pricing when fixed costs are low (high).read more
Citations
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Book ChapterDOI
Mobility barriers and the value of incumbency
TL;DR: In this paper, the authors discuss the difference between determinants of barriers to the mobility of capital and the welfare implications of entry and exit and discuss the role of behavior in the determination of the conditions of entry.
Posted Content
Mobility Barriers and the Value of Incumbency
TL;DR: In this paper, the authors discuss the difference between determinants of barriers to the mobility of capital and the welfare implications of entry and exit and discuss the role of behavior in the determination of the conditions of entry.
Journal ArticleDOI
The Role of Potential Competition in Industrial Organization
TL;DR: In this paper, the authors examined the strengths and limitations of several alternative theories of potential competition by examining the available theoretical, empirical and institutional knowledge, and partitioned the analysis into four major schools of thought, according to their most central propositions.
Journal ArticleDOI
Strategic Deterrence of Sequential Entry into an Industry
TL;DR: In this paper, the authors consider a scenario where a sequence of firms enters or attempts to enter at distinct points in time and examine the qualitative nature of the deterrence decision undertaken by incumbent firms.
Journal ArticleDOI
Limit Qualities and Entry Deterrence
Shabtai Donnenfeld,Shlomo Weber +1 more
TL;DR: In this paper, the authors investigate how the interplay of competition among incumbents and the magnitude of a potential entrant's setup cost determines the configuration of the array of products to be offered in a perfect Nash equilibrium.
References
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Journal ArticleDOI
Entry, Capacity, Investment and Oligopolistic Pricing
TL;DR: In this paper, the authors argue that entry is deterred in an industry when existing firms have enough capacity to make a new entrant unprofitable, and that this capacity need not be fully utilized in the absence of entry.
Journal ArticleDOI
A model of duopoly suggesting a theory of entry barriers
TL;DR: The authors analyzes a model of duopoly with fixed costs and finds that two aspects of product differentiation have distinct effects: an absolute advantage in demand for the established firm makes entry harder, but a lower cross-price effect facilitates it.
Posted Content
Strategic Entry Deterrence
TL;DR: In this article, two classes of entry barriers are distinguished: the postentry absolute advantage and the preentry asymmetry advantage, where the established firm would be at a profit advantage over the potential entrant.
Journal ArticleDOI
On the rationality of limit pricing
TL;DR: The theory of limit pricing as mentioned in this paper was originally proposed by Harrod's (1956) and Sylos-Labini (I957) and made into the key feature of a theory of oligopoly price, where firms in monopolistically competitive markets might not reach the 'tangency solution' of Chamberlin but might rather set a price lower than the tangency price, so as to discourage the entrance of new competitors.