Network Competition and Entry Deterrence
AbstractWe develop a model of logit demand that extends the traditional duopoly framework of network competition to a multi-firm industry. First, we show that incumbents establish the reciprocal access charge inefficiently below cost when they compete in prices but they behave efficiently if they compete in utilities. Secondly, we study how incumbents determine the industry-wide access charge under the threat of entry. We show that incumbents may accommodate all possible entrants, only a group of them, or may completely deter entry. When entry deterrence is the preferred option, incumbents distort the access charge upwards. Copyright (C) The Author(s). Journal compilation (C) Royal Economic Society 2008.
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Bibliographic InfoArticle provided by Royal Economic Society in its journal The Economic Journal.
Volume (Year): 118 (2008)
Issue (Month): 531 (08)
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- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
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