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Entry Deterrence And Entry Inducement In An Industry With Complementary Products

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JEONG-YOO KIM

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Abstract

This paper discusses the possibility of signal jamming between multiple informed incumbents with conflicting interests and examines the implication of the possibility in the limit pricing literature. I find fully separating equilibria where the incumbent competing against the entrant does not use limit pricing in an optimal response to "inductive pricing” by another incumbent desiring ent ry i.e., charging a lower price than the static equilibrium price to induce entry. Thus, contrary to Milgrom and Roborts, the consequences of asymmetric information for welfare are ambiguous even in fully separating equilibria. [L11]

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Publisher Info
Article provided by Korean International Economic Association in its journal International Economic Journal.

Volume (Year): 17 (2003)
Issue (Month): 4 (December)
Pages: 107-123
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Handle: RePEc:taf:intecj:v:17:y:2003:i:4:p:107-123

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Milgrom, Paul & Roberts, John, 1982. "Limit Pricing and Entry under Incomplete Information: An Equilibrium Analysis," Econometrica, Econometric Society, vol. 50(2), pages 443-59, March. [Downloadable!] (restricted)
  2. Michael H. Riordan, 1985. "Imperfect Information and Dynamic Conjectural Variations," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 41-50, Spring. [Downloadable!] (restricted)
  3. Schultz, Christian, 1999. "Limit pricing when incumbents have conflicting interests," International Journal of Industrial Organization, Elsevier, vol. 17(6), pages 801-825, August. [Downloadable!] (restricted)
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  4. Joseph E. Harrington Jr., 1987. "Oligopolistic Entry Deterrence under Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 211-231, Summer. [Downloadable!] (restricted)
  5. Kyle Bagwell & Garey Ramey, 1991. "Oligopoly Limit Pricing," RAND Journal of Economics, The RAND Corporation, vol. 22(2), pages 155-172, Summer. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Luis M. Granero, 2005. "Upward and Downward Limit Pricing: The Role of Post-Entry Competition," The B.E. Journal of Theoretical Economics, Berkeley Electronic Press, vol. 0(1). [Downloadable!]
  2. Jeong-Yoo Kim, 2003. "Signal Jamming in Games with Multiple Senders," The B.E. Journal of Theoretical Economics, Berkeley Electronic Press, vol. 0(1). [Downloadable!]
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