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Diversification as a Strategic Preemptive Weapon

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  • Aron, Debra J

Abstract

This article examines the role that multimarket operations play in a firm's ability to preempt entry into new markets when presence in a market does not commit the firm to remain there. Success in one market affects a firm's incentives and, in turn, strategic power, to fight a rival for survival in a related market. This is modeled as a war of attrition, and the risk-dominant equilibrium is derived. The model supports brand proliferation as a credible preemptive strategy for an established firm and also has implications regarding the strategic role of economies of scope and "deep pockets." Copyright 1993 by MIT Press.

Suggested Citation

  • Aron, Debra J, 1993. "Diversification as a Strategic Preemptive Weapon," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 2(1), pages 41-70, Spring.
  • Handle: RePEc:bla:jemstr:v:2:y:1993:i:1:p:41-70
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    Cited by:

    1. Garcia-Gallego, Aurora & Georgantzis, Nikolaos, 2001. "Multiproduct activity in an experimental differentiated oligopoly," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 493-518, March.
    2. Bourreau, Marc, 2004. "The impact of uncertainty about demand growth on preemption," Journal of Economics and Business, Elsevier, vol. 56(5), pages 363-376.

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