Free Riding in Noncooperative Entry Deterrence with Differentiated Products
AbstractWe examine free riding and underinvestment in noncooperative entry deterrence in the Gilbert and Vives (1986) model with differentiated products. Our analysis proves that for products that are differentiated enough, when both entry allowing and entry deterring equilibria coexist, the symmetric entry deterring equilibrium may Pareto dominate the entry equilibrium. Hence, “coordination failure” underinvestment in entry prevention can occur. However, as claimed, the overinvestment result of Gilbert and Vives remains robust to moderate amounts of product differentiation. We also show that coordination failure underinvestment arises in a wide variety of entry deterrence models and does not rely on assumptions regarding strategic substitutability or complementarity of precommitments.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoArticle provided by Southern Economic Association in its journal Southern Economic Journal.
Volume (Year): 72 (2005)
Issue (Month): 1 (July)
Find related papers by JEL classification:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- repec:ebl:ecbull:v:4:y:2008:i:14:p:1-5 is not listed on IDEAS
- Appelbaum, Elie & Weber, Shlomo, 1992. "A note on the free rider problem in oligopoly," Economics Letters, Elsevier, Elsevier, vol. 40(4), pages 473-480, December.
- Felix Höffler, 2008. "On the consistent use of linear demand systems if not all varieties are available," Economics Bulletin, AccessEcon, vol. 4(14), pages 1-5.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Laura Razzolini).
If references are entirely missing, you can add them using this form.