Entry Deterrence under Agency Constraints
We study models of signaling and entry deterrence when the incumbent firm is subject to agency restraints and the principal does not have the relevant information to signal to the potential entrant. The informational implications of the dynamic agency relationship are fully identified. A characterization of optimal contracts is given for both the case of deterministic markets as well as stochastic markets. Moreover, the differences between whether incentive contracts are observable or hidden are presented. We find that one would expect that the study of agency and entry is relevant in many markets, as agency makes entry more lucrative and principals may have reasons to invite entry to alleviate agency costs. We also propose empirically testable hypotheses that are based on the insights of this paper. This study suggests that entry deterrence is more likely to occur in less volatile markets. Also, entry deterrence is found to be more effective when incentives can credibly be made public.
Volume (Year): 2 (2003)
Issue (Month): 3 (December)
|Contact details of provider:|| Postal: 100 Wenhwa Road, Seatwen, Taichung|
Web page: http://www.ijbe.org/
More information through EDIRC
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.:
- Caillaud Bernard & Hermalin Benjamin, 1993.
"The Use of an Agent in a Signalling Model,"
Journal of Economic Theory,
Elsevier, vol. 60(1), pages 83-113, June.
- Caillaud, Bernard & Hermalin, Benjamin, 1991. "The Use of an Agent in a Signaling Model," Department of Economics, Working Paper Series qt5481b61w, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Bernard Caillaud and Benjamin Hermalin., 1991. "The Use of an Agent in a Signalling Model," Economics Working Papers 91-183, University of California at Berkeley.
- Michael L. Katz., 1991.
"Game-Playing Agents: Unobservable Contracts as Precommitments,"
Economics Working Papers
91-172, University of California at Berkeley.
- Michael L. Katz, 1991. "Game-Playing Agents: Unobservable Contracts as Precommitments," RAND Journal of Economics, The RAND Corporation, vol. 22(3), pages 307-328, Autumn.
- Katz, Michael L., 1991. "Game-Playing Agents: Unobservable Contracts as Precommitments," Department of Economics, Working Paper Series qt79b870w0, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Milgrom, Paul & Roberts, John, 1982.
"Limit Pricing and Entry under Incomplete Information: An Equilibrium Analysis,"
Econometric Society, vol. 50(2), pages 443-59, March.
- Paul Milgrom & John Roberts, 1998. "Limit Pricing and Entry Under Incomplete Information: An Equilibrium Analysis," Levine's Working Paper Archive 245, David K. Levine.
- Leonard J. Mirman & Thomas D. Jeitschko, 2002. "Information and experimentation in short-term contracting," Economic Theory, Springer, vol. 19(2), pages 311-331.
- Leonard J. Mirman & Thomas D. Jeitschko & Egas Salgueiro, 2002.
"The simple analytics of information and experimentation in dynamic agency,"
Springer, vol. 19(3), pages 549-570.
- Thomas D. Jeitschko & Leonard J. Mirman & Egas Salgueiro, 2004. "The simple analytics of information and experimentation in dynamic agency," Working Papers de Economia (Economics Working Papers) 12, Departamento de Economia, Gestão e Engenharia Industrial, Universidade de Aveiro.
- Neelam Jain & Thomas Jeitschko & Leonard Mirman, 2005. "Entry deterrence under financial intermediation with private information and hidden contracts," Review of Economic Design, Springer, vol. 9(3), pages 203-225, 08.
When requesting a correction, please mention this item's handle: RePEc:ijb:journl:v:2:y:2003:i:3:p:179-195. 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: (Yi-Ju Su)
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.