IDEAS home Printed from https://ideas.repec.org/a/taf/ijecbs/v23y2016i1p19-36.html
   My bibliography  Save this article

Raising Rivals’ Fixed Costs

Author

Listed:
  • Morten Hviid
  • Matthew Olczak

Abstract

This article demonstrates that raising fixed costs can serve as a credible mechanism for a well placed firm to exclude its rivals. We identify a number of credible avenues, such as increased regulation, vexatious litigation and increased prices for essential inputs, through which such a firm can raise fixed costs. We show that for a wide range of oligopoly models this may be a profitable strategy, even if the firm’s own fixed costs are affected as much (or even more) than its rivals and even if it is less efficient. The resulting reduction in the number of firms in the market is detrimental to consumer welfare and hence worthy of scrutiny by competition and regulatory authorities.

Suggested Citation

  • Morten Hviid & Matthew Olczak, 2016. "Raising Rivals’ Fixed Costs," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 23(1), pages 19-36, February.
    • Handle: RePEc:taf:ijecbs:v:23:y:2016:i:1:p:19-36
    DOI: 10.1080/13571516.2015.1055913
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/13571516.2015.1055913
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/13571516.2015.1055913?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. William P. Rogerson, 1984. "A Note on the Incentive for a Monopolist to Increase Fixed Costs as a Barrier to Entry," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(2), pages 399-402.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. E. Bacchiega & P. G. Garella, 2018. "Niche vs. central firms: Technology choice and cost-price dynamics in a differentiated oligopoly," Working Papers wp1126, Dipartimento Scienze Economiche, Universita' di Bologna.
    2. Hanna Skjervheim Bernes & Isabel Marie Flo & Øystein Foros & Hans Jarle Kind, 2019. "Raising rivals’ costs or improving efficiency? An exploratory study of managers’ views on backward integration in the grocery market," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 18(1), pages 65-75, February.
    3. Miles Kellerman, 2021. "Market structure and disempowering regulatory intermediaries: Insights from U.S. trade surveillance," Regulation & Governance, John Wiley & Sons, vol. 15(4), pages 1350-1369, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dickson, Alex & MacKenzie, Ian A., 2018. "Strategic trade in pollution permits," Journal of Environmental Economics and Management, Elsevier, vol. 87(C), pages 94-113.
    2. Vincent Rebeyrol, 2023. "Protection Without Discrimination," The Economic Journal, Royal Economic Society, vol. 133(655), pages 2807-2827.
    3. Dormady, Noah C., 2013. "Market power in cap-and-trade auctions: A Monte Carlo approach," Energy Policy, Elsevier, vol. 62(C), pages 788-797.
    4. Shilov, Andrey & Tourovsky, Boris, 2008. "The minimum wage in the dominant firm model," IAB-Discussion Paper 200823, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    5. Sylvain Béal & Marc Deschamps & Joël Thomas Ravix & Olivier Sautel, 2010. "Informational Advantage and Influence of Communicating Central Banks," Documents de Travail de l'OFCE 2010-04, Observatoire Francais des Conjonctures Economiques (OFCE).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:ijecbs:v:23:y:2016:i:1:p:19-36. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/CIJB20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.