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A Sequential Entry Model with Strategic Use of Excess Capacity

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  • Brad Barham
  • Roger Ware

Abstract

A model of sequential entry with Leontief costs is studied in which demand is iso-elastic. Some or all firms may hold excess capacity in the perfect equilibrium to the entry game. Firms with a first mover advantage trade off the positioning value of a large investment in capacity, leading to a large market share, against the possible costs of bearing the burden of entry deterrence through holding excess capacity in equilibrium.

Suggested Citation

  • Brad Barham & Roger Ware, 1991. "A Sequential Entry Model with Strategic Use of Excess Capacity," Working Paper 835, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:835
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    File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_835.pdf
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    Cited by:

    1. Özelkan, Ertunga C. & ÇakanyIldIrIm, Metin, 2009. "Reverse bullwhip effect in pricing," European Journal of Operational Research, Elsevier, vol. 192(1), pages 302-312, January.
    2. Dijkstra, Bouwe R., 2007. "An investment contest to influence environmental policy," Resource and Energy Economics, Elsevier, vol. 29(4), pages 300-324, November.
    3. James G. Mulligan, 2006. "Endogenously determined Quality and Price In a Two-Sector Competitive Service Market With an Application to Down-Hill Skiing," Working Papers 06-01, University of Delaware, Department of Economics.
    4. Aniruddha Bagchi & Arijit Mukherjee, 2011. "Commitment and excess capacity with licensing: an old debate with a new look," Journal of Economics, Springer, vol. 103(2), pages 133-147, June.
    5. Ganslandt, Mattias, 2001. "Strategic Investment and Market Integration," Working Paper Series 560, Research Institute of Industrial Economics.
    6. Özelkan, Ertunga C. & Lim, Churlzu & Adnan, Ziaul Haq, 2018. "Conditions of reverse bullwhip effect in pricing under joint decision of replenishment and pricing," International Journal of Production Economics, Elsevier, vol. 200(C), pages 207-223.

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