Forgoing invention to deter entry
A monopoly facing potential entry may not want to develop an efficient technology even at zero R&D costs. Such a phenomenon occurs if a new technology is distinct from the existing one so production uncertainty becomes technology-specific. Then the monopoly can reduce the entrant's post-entry profit to the point of deterrence by using the existing technology with which the entrant would enter. We show that the monopoly develops a new technology when the entrant faces a sufficiently high or low entry cost but forgoes invention when the entry cost is intermediate. These results hold both in quantity and price competition.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dasgupta, Partha & Maskin, Eric, 1987. "The Simple Economics of Research Portfolios," Economic Journal, Royal Economic Society, vol. 97(387), pages 581-595, September.
- Michael Waldman, 1987.
"Noncooperative Entry Deterrence, Uncertainty, and the Free Rider Problem,"
Review of Economic Studies,
Oxford University Press, vol. 54(2), pages 301-310.
- Michael Waldman, 1985. "Noncooperative Entry Deterrence, Uncertainty, and the Free Rider Problem," UCLA Economics Working Papers 364, UCLA Department of Economics.
- Rey, Patrick & Tirole, Jean, 1986. "The Logic of Vertical Restraints," American Economic Review, American Economic Association, vol. 76(5), pages 921-939, December.
- Patrick Rey & Jean Tirole, 1985. "The Logic of Vertical Restraints," Working papers 396, Massachusetts Institute of Technology (MIT), Department of Economics.
- Salop, Steven C, 1979. "Strategic Entry Deterrence," American Economic Review, American Economic Association, vol. 69(2), pages 335-338, May.
- Gilbert, Richard J & Newbery, David M G, 1982. "Preemptive Patenting and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 72(3), pages 514-526, June.
- Reinganum, Jennifer F, 1983. "Uncertain Innovation and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 73(4), pages 741-748, September.
- Reinganum, Jennifer R., 1982. "Uncertain Innovation and the Persistence of Monopoly," Working Papers 431, California Institute of Technology, Division of the Humanities and Social Sciences.
- Salop, Steven C & Scheffman, David T, 1983. "Raising Rivals' Costs," American Economic Review, American Economic Association, vol. 73(2), pages 267-271, May.
- Salop, Steven C & Scheffman, David T, 1987. "Cost-Raising Strategies," Journal of Industrial Economics, Wiley Blackwell, vol. 36(1), pages 19-34, September.
- Jay Pil Choi & Sang-Seung Yi, 2000. "Vertical Foreclosure with the Choice of Input Specifications," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 717-743, Winter.
- Choi, J.P. & Yi, S.S., 1997. "Vertical Foreclosure with the Choice of Input Specifications," Discussion Paper 1997-16, Tilburg University, Center for Economic Research.
- Eric S. Maskin, 1999. "Uncertainty and entry deterrence," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 14(2), pages 429-437.
- Takalo, Tuomas & Kanniainen, Vesa, 2000. "Do patents slow down technological progress?: Real options in research, patenting, and market introduction," International Journal of Industrial Organization, Elsevier, vol. 18(7), pages 1105-1127, October.
- Joseph E. Harrington Jr., 1987. "Oligopolistic Entry Deterrence under Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 211-231, Summer. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:indorg:v:27:y:2009:i:5:p:632-638. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.