We show that, under asymmetric information about costs, limit location strategies, that is distortions in pre-entry locations created by the entrant's inference about the incumbent's cost advantage which prevent entry, emerge not only as the result of the incumbent's cost advantage but also as the result of the entrant's beliefs concerning this advantage. The location at the market center may deter entry under incomplete information for a high cost incumbent who would accommodate entry under complete information; moreover, a low cost incumbent deterring entry at that location under complete information may be better off accommodating entry under incomplete information.
Nous montrons qu'en présence d'information asymétrique sur les coûts, les stratégies de localisation limite, c'est-à-dire les distorsions dans les localisations permettant à la firme établie d'empêcher l'entrée, résultent non seulement de l'avantage coût de la firme établie mais aussi des croyances de l'entrant concernant cet avantage. La localisation au centre du marché peut dissuader d'entrer, si l'on se trouve en information incomplète et en présence d'une firme établie encourant un coût élevé. Cette même firme accepterait l'entrée en information complète. De plus, une firme établie, encourant un coût faible dissuadant l'entrée à cette localisation en information complète, aurait intérêt à accepter l'entrée si elle se trouvait en information incomplète.
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References listed on IDEAS 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.:
Kyle Bagwell & Garey Ramey, 1987.
"Advertising and Limit Pricing,"
Discussion Papers
729, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
[Downloadable!]
Kenneth L. Judd, 1983.
"Credible Spatial Preemption,"
Discussion Papers
577, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
[Downloadable!]
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