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Holding Excess Capacity to Deter Entry in a Labour-Managed Industry

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  • Junsen Zhang

Abstract

This paper considers the Dixit model of entry deterrence and adapts it to the case in which firms are maximizing surplus per worker rather than profits. The properties of this model are analogous but not identical to those of the Dixit model. Of particular interest is the possibility that the best response functi ons may be positively sloped, even though demand satisfies that a firm's marginal revenue is decreasing in rival firms' output. This possibil ity implies the existence of perfect equilibria in which the incumbent holds excess capacity, which is not possible in the Dixit model give n the above condition.

Suggested Citation

  • Junsen Zhang, 1993. "Holding Excess Capacity to Deter Entry in a Labour-Managed Industry," Canadian Journal of Economics, Canadian Economics Association, vol. 26(1), pages 222-234, February.
    • Handle: RePEc:cje:issued:v:26:y:1993:i:1:p:222-34
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    Citations

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    Cited by:

    1. Kazuhiro Ohnishi, 2010. "Most-Favoured-Customer Pricing and Labour-Managed Oligopoly," Journal of Industry, Competition and Trade, Springer, vol. 10(1), pages 33-40, March.
    2. Yoshihiro Tomaru & Yasuhiko Nakamura & Masayuki Saito, 2009. "Capacity Choice in a Mixed Duopoly with Managerial Delegation," Economics Bulletin, AccessEcon, vol. 29(3), pages 1904-1924.
    3. repec:ebl:ecbull:v:12:y:2004:i:2:p:1-7 is not listed on IDEAS
    4. Luciano Fanti & Nicola Meccheri, 2017. "Unionization Regimes, Capacity Choice by Firms and Welfare Outcomes," Manchester School, University of Manchester, vol. 85(6), pages 661-681, December.
    5. Nakamura, Yasuhiko, 2014. "Capacity choice in a duopoly with a consumer-friendly firm and an absolute profit-maximizing firm," International Review of Economics & Finance, Elsevier, vol. 34(C), pages 105-117.
    6. Koichi Futagami & Makoto Okamura & Tetsuya Shinkai & Nobuhiro Mori, 2005. "Organizational Entry Deterrence Barrier:The Japanese Firm vs.the American Firm," Discussion Paper Series 23, School of Economics, Kwansei Gakuin University, revised Jan 2005.
    7. Kazuhiro Ohnishi, 2009. "Capacity Investment and Mixed Duopoly with State-Owned and Labor-Managed Firms," Annals of Economics and Finance, Society for AEF, vol. 10(1), pages 49-64, May.
    8. Kangsik Choi & DongJoon Lee, 2020. "Do firms choose overcapacity or undercapacity in a vertical structure?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(5), pages 839-847, July.
    9. Leach, J. Chris & Moyen, Nathalie & Yang, Jing, 2013. "On the strategic use of debt and capacity in rapidly expanding markets," Journal of Corporate Finance, Elsevier, vol. 23(C), pages 332-344.
    10. Tsuyoshi Toshimitsu, 2020. "On excess capacity in a monopoly market with network externalities," Discussion Paper Series 220, School of Economics, Kwansei Gakuin University.
    11. Tsuyoshi Toshimitsu, 2021. "Note on Excess Capacity in a Monopoly Market with Network Externalities," Journal of Industry, Competition and Trade, Springer, vol. 21(3), pages 411-422, September.
    12. Leach, J. Chris & Moyen, Nathalie & Yang, Jing, 2004. "On the Strategic Use of Debt and Capacity in Imperfectly Competitive Product Markets," SIFR Research Report Series 33, Institute for Financial Research.
    13. Ohnishi, Kazuhiro, 2018. "Wage-Rise Contract and Labour-Managed Cournot Oligopoly with Complementary Goods," MPRA Paper 88235, University Library of Munich, Germany.
    14. Kazuhiro Ohnishi, 2009. "Strategic Commitment and Three-Stage Games with Labour-Managed and Profit-Maximizing Firms," Finnish Economic Papers, Finnish Economic Association, vol. 22(2), pages 63-74, Autumn.
    15. Ann Horowitz & Ira Horowitz, 1999. "Quality choice: Does it matter which workers own and manage the cooperative firm?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 27(4), pages 394-409, December.
    16. Hikaru Ogawa & Akira Nishimori, 2004. "Do Firms Always Choose Excess Capacity?," Economics Bulletin, AccessEcon, vol. 12(2), pages 1-7.

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