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Entry-Deterrence in Stackelberg Perfect Equilibria

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  • Basu, Kaushik
  • Singh, Nirvikar

Abstract

This paper examines entry deterrence in a duopoly where the postentry game is Stackelberg. It is argued that, in reality, firms can use a broader range of precommitments than is allowed for in the literature. This paper permits such precommitments and analyzes the perfect equilibria. It also allows for the fact that there may be fixed costs associated not only with entry, but with beginning production. Several interesting possibilities are explained, including the existence of excess capacity and the holding of inventories even in the absence of any uncertainty. Copyright 1990 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Basu, Kaushik & Singh, Nirvikar, 1990. "Entry-Deterrence in Stackelberg Perfect Equilibria," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(1), pages 61-71, February.
    • Handle: RePEc:ier:iecrev:v:31:y:1990:i:1:p:61-71
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    Cited by:

    1. Yuanzhu Lu & Sougata Poddar, 2009. "Endogenous Timing In A Mixed Duopoly And Private Duopoly –‘Capacity‐Then‐Quantity’ Game: The Linear Demand Case," Australian Economic Papers, Wiley Blackwell, vol. 48(2), pages 138-150, June.
    2. 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.
    3. Luciano Fanti & Nicola Meccheri, 2014. "Capacity choice and welfare under alternative unionisation structures," Discussion Papers 2014/176, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    4. Lu, Yuanzhu & Poddar, Sougata, 2005. "Mixed oligopoly and the choice of capacity," Research in Economics, Elsevier, vol. 59(4), pages 365-374, December.
    5. Arijit Mukherjee & Laixun Zhao, 2017. "Profit Raising Entry," Journal of Industrial Economics, Wiley Blackwell, vol. 65(1), pages 214-219, March.
    6. Luciano Fanti & Nicola Meccheri, 2017. "Unionization Regimes, Capacity Choice by Firms and Welfare Outcomes," Manchester School, University of Manchester, vol. 85(6), pages 661-681, December.
    7. Kazuhiro Ohnishi, 2019. "Capacity choice in an international mixed triopoly," Working Papers e140, Tokyo Center for Economic Research.
    8. Arijit Mukherjee, 2002. "Capacity Commitment and Licensing," Industrial Organization 0211004, University Library of Munich, Germany.
    9. 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.
    10. Anant, T. C. A. & Basu, Kaushik & Mukherji, Badal, 1995. "A model of monopoly with strategic government intervention," Journal of Public Economics, Elsevier, vol. 57(1), pages 25-43, May.
    11. Basu, Kaushik, 1995. "Stackelberg equilibrium in oligopoly: An explanation based on managerial incentives," Economics Letters, Elsevier, vol. 49(4), pages 459-464, October.
    12. Dan Kovenock & Raymond Deneckere & Tom Faith & Beth Allen, 2000. "Capacity precommitment as a barrier to entry: A Bertrand-Edgeworth approach," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 15(3), pages 501-530.
    13. Javier M. López-Cuñat, 1999. "One-stage and two-stage entry Cournot equilibria," Investigaciones Economicas, Fundación SEPI, vol. 23(1), pages 115-128, January.
    14. Ohnishi, Kazuhiro, 2019. "Capacity choice in an international mixed triopoly," MPRA Paper 94051, University Library of Munich, Germany.
    15. Kazuhiro Ohnishi, 2022. "Lifetime Employment and Stackelberg Mixed Duopoly Games with a Foreign Labour-Managed Competitor," Arthaniti: Journal of Economic Theory and Practice, , vol. 21(1), pages 27-42, June.
    16. Basu Kaushik, 2014. "The Art of Currency Manipulation: How Some Profiteer by Deliberately Distorting Exchange Rates," Journal of Globalization and Development, De Gruyter, vol. 4(2), pages 199-211, February.
    17. Kazuhiro Ohnishi, 2012. "Quantity-setting games with lifetime employment contracts as a strategic commitment," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 49(2), pages 25-40, December.
    18. Olivier Lindamulage de Silva & Vineeth Varma & Ming Cao & Irinel-Constantin Morarescu & Samson Lasaulce, 2023. "A Stackelberg viral marketing design for two competing players," Post-Print hal-04150375, HAL.

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