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Raising Rivals' Fixed Costs

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Author Info
Matt Olczak () (Centre for Competition Policy, University of East Anglia)

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Abstract

This paper analyses the strategic use of fixed costs to deter entry or monopolize a market in a standard Cournot framework. First of all a general case shows how the presence of fixed costs can affect the possible equilibria to the Cournot game. It is shown that the presence of a firm with a first-mover advantage can have important implications if fixed costs are raised. In addition the forward induction process becomes important in determining plausible equilibria. The use of firstly regulation and secondly 'nuisance' law-suits are considered as strategies to increase fixed costs.

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Publisher Info
Paper provided by Centre for Competition Policy, University of East Anglia in its series Working Papers with number 05-1.

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Length: 24 pages
Date of creation: Jan 2005
Date of revision:
Handle: RePEc:ccp:wpaper:wp05-01

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Related research
Keywords: Fixed costs; raising rivals' costs; entry deterrence; monopolization; regulation; nuisance law-suits;

Find related papers by JEL classification:
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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This page was last updated on 2009-11-26.

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