Entry Deterrence in the Commons with Multiple Incumbents
AbstractWe examine an entry-deterrence model with multiple incumbents who strategically increase their individual appropriation in order to prevent entry. We find that, as the number of incumbents increases entry deterence can only be supported if the resource is abundant. Additionally, we show that entry deterrence yields a welfare improvement, relative to contexts of unthreatened entry, if few firms exploit a moderately abundant resource. When several firms compete, however, welfare losses can arise. Consequently, the presence of several incumbents recommends the implementation of policies that hinder entry under larger conditions than when a single incumbent exploits the commons.
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Bibliographic InfoPaper provided by School of Economic Sciences, Washington State University in its series Working Papers with number 2012-1.
Length: 27 pages
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Entry Deterrence; Multiple Incumbents; Common Pool Resources;
Find related papers by JEL classification:
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
- D62 - Microeconomics - - Welfare Economics - - - Externalities
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- Apesteguia, Jose, 2006. "Does information matter in the commons?: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 60(1), pages 55-69, May.
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- Ana Espinola-Arredondo & Felix Munoz-Garcia, 2010. "Can Incomplete Information Lead to Under-exploitation in the Commons," Working Papers 2010-04, School of Economic Sciences, Washington State University.
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- Polasky, Stephen & Bin, Okmyung, 2001. "Entry Deterrence and Signaling in a Nonrenewable Resource Model," Journal of Environmental Economics and Management, Elsevier, vol. 42(3), pages 235-256, November.
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