Subsidizing the Competition
Abstract
This paper examines puzzling behavior in industries in which one firm is able to obtain a price premium and/or a dominant market share for a product which is identical to that of its rivals. It is shown that when there is learning by doing, economies of scale, network externalities, or reputational effects, the dominant firm's position may be enhanced by the presence of many weak competitors rather than a few strong ones. The dominant firm may therefore subsidize entry by giving away technical information, setting low licensing fees, or creating its own in-house competition.Download Info
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Paper provided by University of Toronto, Department of Economics in its series Working Papers with number ecpap-96-02.Length: 23 pages
Date of creation: 02 Jan 1996
Date of revision:
Handle: RePEc:tor:tecipa:ecpap-96-02
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Related research
Keywords:Find related papers by JEL classification:
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
References
References listed on IDEASPlease 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.:
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8618, University of California at Berkeley.
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- Nancy T. Gallini & Ralph A. Winter, 1985. "Licensing in the Theory of Innovation," RAND Journal of Economics, The RAND Corporation, vol. 16(2), pages 237-252, Summer.
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- Nicholas Economides, 1997. "Network Externalities, Complementarities, and Invitations to Enter," Industrial Organization 9701004, EconWPA.
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