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Entry for Buyout

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  • Rasmusen, Eric

Abstract

The possibility of buying out an entrant has an import ant effect on entry deterrence. Entrants can blackmail the incumbent by threatening to keep prices low, and buyout can make entry profitab le which otherwise would not be. In particular, the entry-deterrence policy of excess capacity to reduce the postentry price can not only fail, but work against the incumbent. The presence of multiple oligop olistic incumbents or multiple potential entrants, however, can disco urage entry for buyout. Copyright 1988 by Blackwell Publishing Ltd.

Suggested Citation

  • Rasmusen, Eric, 1988. "Entry for Buyout," Journal of Industrial Economics, Wiley Blackwell, vol. 36(3), pages 281-299, March.
  • Handle: RePEc:bla:jindec:v:36:y:1988:i:3:p:281-99
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    References listed on IDEAS

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    Cited by:

    1. Henkel, Joachim & Rønde, Thomas & Wagner, Marcus, 2015. "And the winner is—Acquired. Entrepreneurship as a contest yielding radical innovations," Research Policy, Elsevier, vol. 44(2), pages 295-310.
    2. Konrad, Kai A. & Skaperdas, Stergios, 1997. "Credible threats in extortion," Journal of Economic Behavior & Organization, Elsevier, vol. 33(1), pages 23-39, May.
    3. Gans, Joshua, 1968- & Stern, Scott, 1969-, 1998. "Incumbency and R&D incentives : licensing the gale of creative distruction," Working papers WP 4008-98., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    4. Mason, Robin & Weeds, Helen, 2013. "Merger policy, entry, and entrepreneurship," European Economic Review, Elsevier, vol. 57(C), pages 23-38.
    5. Joshua Gans & Scott Stern, 2003. "When does funding research by smaller firms bear fruit?: Evidence from the SBIR program," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 12(4), pages 361-384.
    6. Cabral, Luis M. B., 2003. "Horizontal mergers with free-entry: why cost efficiencies may be a weak defense and asset sales a poor remedy," International Journal of Industrial Organization, Elsevier, vol. 21(5), pages 607-623, May.
    7. Josh Lerner & Jean Tirole, 2004. "Efficient Patent Pools," American Economic Review, American Economic Association, vol. 94(3), pages 691-711, June.
    8. Mason, Robin & Weeds, Helen, 2002. "The Failing Firm Defence: Merger Policy and Entry," CEPR Discussion Papers 3664, C.E.P.R. Discussion Papers.
    9. James D. Dana & Kathryn Spier, 2000. "Entry Deterrence in a Duopoly Model," Econometric Society World Congress 2000 Contributed Papers 1451, Econometric Society.
    10. Ramón Faulí-Oller & Joel Sandonís, 2007. "Downstream Mergers And Entry," Working Papers. Serie AD 2007-21, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    11. Gunther Tichy, 2001. "What Do We Know about Success and Failure of Mergers?," Journal of Industry, Competition and Trade, Springer, vol. 1(4), pages 347-394, December.

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