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Weak entrants are welcome

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  • Ashiya, Masahiro

Abstract

This paper investigates the decision problem of an incumbent firm confronted by both a weak and a strong entrant in a differentiated market. Suppose that the incumbent can deter entry of the weak firm, but cannot deter entry of the strong firm by itself. Then the incumbent may allow entry of the weak firm and use it to alter the strong firm's entry decision. The present paper formalizes this idea, and it sheds new light on the fact that domestic firms are sometimes able to block strong foreign firms after trade loberalization. The idea also expalins why a dominant firm lets fringe firms be in the market.

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Bibliographic Info

Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 18 (2000)
Issue (Month): 6 (August)
Pages: 975-984

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Handle: RePEc:eee:indorg:v:18:y:2000:i:6:p:975-984

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Web page: http://www.elsevier.com/locate/inca/505551

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References

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  1. repec:fth:osakae:476 is not listed on IDEAS
  2. Berck, Peter & Perloff, Jeffrey M, 1987. "The Dynamic Annihilation of a Rational Competitive Fringe by a Low-cost Dominant Firm," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt6926m79z, Department of Agricultural & Resource Economics, UC Berkeley.
  3. James Brander & Jonathan Eaton, 1982. "Product Line Rivalry," Working Papers 519, Queen's University, Department of Economics.
  4. Martinez-Giralt, Xavier & Neven, Damien J, 1988. "Can Price Competition Dominate Market Segmentation?," Journal of Industrial Economics, Wiley Blackwell, vol. 36(4), pages 431-42, June.
  5. Gilbert, Richard & Vives, Xavier, 1986. "Entry Deterrence and the Free Rider Problem," Review of Economic Studies, Wiley Blackwell, vol. 53(1), pages 71-83, January.
  6. Neven, Damien J., 1987. "Endogenous sequential entry in a spatial model," International Journal of Industrial Organization, Elsevier, vol. 5(4), pages 419-434.
  7. Crampes, Claude & Hollander, Abraham, 1993. "Umbrella Pricing to Attract Early Entry," Economica, London School of Economics and Political Science, vol. 60(240), pages 465-74, November.
  8. Gillian K. Hadfield, 1991. "Credible Spatial Preemption through Franchising," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 531-543, Winter.
  9. Elie Appelbaum & Chin Lim, 1985. "Contestable Markets under Uncertainty," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 28-40, Spring.
  10. Bonanno, Giacomo, 1987. "Location Choice, Product Proliferation and Entry Deterrence," Review of Economic Studies, Wiley Blackwell, vol. 54(1), pages 37-45, January.
  11. Gallini, Nancy T, 1984. "Deterrence by Market Sharing: A Strategic Incentive for Licensing," American Economic Review, American Economic Association, vol. 74(5), pages 931-41, December.
  12. Vives, Xavier, 1988. "Sequential entry, industry structure and welfare," European Economic Review, Elsevier, vol. 32(8), pages 1671-1687, October.
  13. Richard Schmalensee, 1978. "Entry Deterrence in the Ready-to-Eat Breakfast Cereal Industry," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 305-327, Autumn.
  14. Edward C. Prescott & Michael Visscher, 1977. "Sequential Location among Firms with Foresight," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 378-393, Autumn.
  15. repec:fth:osakae:468 is not listed on IDEAS
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Citations

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Cited by:
  1. Magazzini, Laura & Pammolli, Fabio & Riccaboni, Massimo, 2004. "Dynamic Competition in Pharmaceuticals: Patent Expiry, Generic Penetration, and Industry Structure," MPRA Paper 15968, University Library of Munich, Germany.
  2. Aidan Hollis, 2003. "The Anti-Competitive Effects of Brand-Controlled "Pseudo- Generics" in the Canadian Pharmaceutical Market," Canadian Public Policy, University of Toronto Press, vol. 29(1), pages 21-31, March.
  3. Hiroshi Kitamura, 2008. "Exclusionary Vertical Contracts with Multiple Entrants," Discussion Papers in Economics and Business 08-39, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  4. Byoung Heon Jun & In-Uck Park, 2005. "Anti-Limit Pricing," Levine's Bibliography 172782000000000041, UCLA Department of Economics.
  5. Heide Coenen, 2000. "Network Effects in Telecommunications: When Entrants are Welcome," Discussion Papers 241, Government Institute for Economic Research Finland (VATT).
  6. Laura Magazzini & Fabio Pammolli & Massimo Riccaboni, 2004. "Dynamic competition in pharmaceuticals," The European Journal of Health Economics, Springer, vol. 5(2), pages 175-182, May.
  7. Toshihiro Matsumura & Noriaki Matsushima, 2009. "Cost differentials and mixed strategy equilibria in a Hotelling model," The Annals of Regional Science, Springer, vol. 43(1), pages 215-234, March.
  8. Kitamura, Hiroshi, 2010. "Exclusionary vertical contracts with multiple entrants," International Journal of Industrial Organization, Elsevier, vol. 28(3), pages 213-219, May.
  9. Junichiro Ishida & Toshihiro Matsumura & Noriaki Matsushima, 2010. "Market Competition, R&D and Firm Profits in Asymmetric Oligopoly," ISER Discussion Paper 0777, Institute of Social and Economic Research, Osaka University.
  10. Ishibashi, Ikuo, 2003. "A note on credible spatial entry deterrence," International Journal of Industrial Organization, Elsevier, vol. 21(2), pages 283-289, February.
  11. Ashiya, M., 1999. "Brand Proliferation is Useless to Deter Entry," ISER Discussion Paper 0476, Institute of Social and Economic Research, Osaka University.
  12. Laura Magazzini & Fabio Pammolli & Gianluca Papa & Nicola Carmine Salerno, 2005. "Generici vs. Branded: confronto internazionale su prodotti off-patent rimborsati dal SSN," Working Papers 01-2005, Competitività Regole Mecati (CERM).
  13. Murooka, Takeshi, 2013. "A note on credible spatial preemption in an entry–exit game," Economics Letters, Elsevier, vol. 118(1), pages 26-28.

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