Entry Decision and Pricing Policies
AbstractWe extend the analysis of the impact of firms' pricing policies upon entry to a framework where price competition and differentiated products are present. We consider a model where an incumbent serves two distinct and independent geographical markets and an entrant may enter in one of the markets. Entry under discriminatory pricing is more likely than under uniform pricing when entry is profitable under discriminatory pricing but unprofitable under uniform pricing. Our results show entry under discriminatory pricing may be more, less or equally likely than under uniform pricing. We show that the degree of product substitutability affects the impact of pricing policies upon entry decision.
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Bibliographic InfoPaper provided by Departamento de Economia, Gestão e Engenharia Industrial, Universidade de Aveiro in its series Working Papers de Economia (Economics Working Papers) with number 41.
Length: 23 pages
Date of creation: Feb 2007
Date of revision:
Entry; Product Differentiation; Discriminatory Pricing; Uniform Pricing;
Find related papers by JEL classification:
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-02-24 (All new papers)
- NEP-COM-2007-02-24 (Industrial Competition)
- NEP-IND-2007-02-24 (Industrial Organization)
- NEP-MIC-2007-02-24 (Microeconomics)
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.:
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- Armstrong, Mark & Vickers, John, 1993.
"Price Discrimination, Competition and Regulation,"
Journal of Industrial Economics,
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- Katz, Michael L, 1984. "Price Discrimination and Monopolistic Competition," Econometrica, Econometric Society, vol. 52(6), pages 1453-71, November.
- Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, October.
- Cheung, Francis K. & Wang, X. Henry, 1999. "A note on the effect of price discrimination on entry: Research note," Journal of Economics and Business, Elsevier, vol. 51(1), pages 67-72, January.
- Gehrig, Thomas & Shy, Oz & Stenbacka, Rune, 2011. "History-based price discrimination and entry in markets with switching costs: A welfare analysis," European Economic Review, Elsevier, vol. 55(5), pages 732-739, June.
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