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A Sequential Entry Model with Strategic Use of Excess Capacity

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  • Brad Barham
  • Roger Ware

Abstract

A model of sequential entry with Leontief costs is studied in which demand is isoelastic. Some or all firms may hold excess capacity in the perfect equilibrium to the entry game. Firms with a first-mover advantage trade off the positioning value of a large investment in capacity, leading to a large market share, against the possible costs of bearing the burden of entry deterrence through holding excess capacity in equilibrium.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 26 (1993)
Issue (Month): 2 (May)
Pages: 286-98

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Handle: RePEc:cje:issued:v:26:y:1993:i:2:p:286-98

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Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
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Cited by:
  1. James G. Mulligan, 2006. "Endogenously determined Quality and Price In a Two-Sector Competitive Service Market With an Application to Down-Hill Skiing," Working Papers 06-01, University of Delaware, Department of Economics.
  2. Ganslandt, Mattias, 2001. "Strategic Investment and Market Integration," Working Paper Series 560, Research Institute of Industrial Economics.
  3. Aniruddha Bagchi & Arijit Mukherjee, 2011. "Commitment and excess capacity with licensing: an old debate with a new look," Journal of Economics, Springer, vol. 103(2), pages 133-147, June.
  4. Özelkan, Ertunga C. & ÇakanyIldIrIm, Metin, 2009. "Reverse bullwhip effect in pricing," European Journal of Operational Research, Elsevier, vol. 192(1), pages 302-312, January.
  5. Dijkstra, Bouwe R., 2007. "An investment contest to influence environmental policy," Resource and Energy Economics, Elsevier, vol. 29(4), pages 300-324, November.

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