Limit Qualities and Entry Deterrence
AbstractIn this article, we investigate how the interplay of competition among incumbents and the magnitude of a potential entrant's setup cost determines the configuration of the array of products to be offered in a perfect Nash equilibrium. We show that incumbents can use limit qualities to deter entry. We also demonstrate that rivalry among incumbents may lead to excessive entry deterrence. Our analysis generates predictions about the correlation between the degree of product differentiation and the size of the entrant's setup costs.
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Bibliographic InfoPaper provided by York (Canada) - Department of Economics in its series Papers with number 92-4.
Length: 27 pages
Date of creation: 1991
Date of revision:
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Postal: YORK UNIVERSITY, DEPARTMENT OF ECONOMICS, 4700 KEELE ST-NORTH YORK ONTARIO H3J 1P3 CANADA.
Phone: (416) 736-5083
Fax: (416) 736-5987
Web page: http://dept.econ.yorku.ca/
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behaviour ; industry ; economic equilibrium ; new products;
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