The capacity investment by a new firm into an established market is explored in a repeated price game. If the entrant expects collusion to prevail upon entry, it may not practice "judo economics" but instead choose to install enough capacity to serve the entire market. This occurs when collusion involves optimal punishment paths.
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Paper provided by Norwegian School of Economics and Business Administration- in its series Papers with number
18/95.
Length: 26 pages Date of creation: 1995 Date of revision: Handle: RePEc:fth:norgee:18/95
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Find related papers by JEL classification: D40 - Microeconomics - - Market Structure and Pricing - - - General D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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