Weak entrants are welcome
This paper investigates the decision problem of an incumbent firm confronted by both a weak and a strong entrant in a differentiated market. Suppose that the incumbent can deter entry of the weak firm, but cannot deter entry of the strong firm by itself. Then the incumbent may allow entry of the weak firm and use it to alter the strong firm's entry decision. The present paper formalizes this idea, and it sheds new light on the fact that domestic firms are sometimes able to block strong foreign firms after trade loberalization. The idea also expalins why a dominant firm lets fringe firms be in the market.
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- Ashiya, Masahiro, 2000.
"Weak entrants are welcome,"
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Elsevier, vol. 18(6), pages 975-984, August.
- Elie Appelbaum & Chin Lim, 1985. "Contestable Markets under Uncertainty," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 28-40, Spring.
- Neven, Damien J., 1987. "Endogenous sequential entry in a spatial model," International Journal of Industrial Organization, Elsevier, vol. 5(4), pages 419-434.
- Ashiya, M., 1999. "Brand Proliferation is Useless to Deter Entry," ISER Discussion Paper 0476, Institute of Social and Economic Research, Osaka University.
- Vives, Xavier, 1988. "Sequential entry, industry structure and welfare," European Economic Review, Elsevier, vol. 32(8), pages 1671-1687, October.
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