Entry Deterrence in the Presence of Learning-by-Doing
AbstractThis paper investigates a signaling entry deterrence model under learning-by-doing. We show that a monopolist’s practice of entry deterrence imposes smaller welfare losses (or larger welfare gains) when learning effects are present than when they are absent, making the intervention of antitrust authorities less urgent. If, however, the welfare loss associated to entry deterrence is still significant, and thus intervention is needed, our paper demonstrates that the incumbent’s practice of entry deterrence is easier to detect by a regulator who does not have access to accurate information about the incumbent’s profit function. Learning-by-doing hence facilitates the regulator’s ability to detect entry deterrence, thus suggesting its role as an “ally” of antitrust authorities.
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Bibliographic InfoPaper provided by School of Economic Sciences, Washington State University in its series Working Papers with number 2010-11.
Length: 22 pages
Date of creation: Jun 2010
Date of revision:
Learning-by-doing; Entry deterrence; Incomplete information; Spillovers;
Find related papers by JEL classification:
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-02 (All new papers)
- NEP-BEC-2010-10-02 (Business Economics)
- NEP-COM-2010-10-02 (Industrial Competition)
- NEP-CTA-2010-10-02 (Contract Theory & Applications)
- NEP-IND-2010-10-02 (Industrial Organization)
- NEP-REG-2010-10-02 (Regulation)
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