IDEAS home Printed from https://ideas.repec.org/a/rje/bellje/v14y1983iautumnp315-325.html
   My bibliography  Save this article

Judo Economics: Capacity Limitation and Coupon Competition

Author

Listed:
  • Judith R. Gelman
  • Steven C. Salop

Abstract

This article analyzes the effect of credible capacity limitation on the interaction between an incumbent and an entrant. The prospect of price competition deters entry by a less efficient firm with unlimited capacity. If, however, the entrant practices "judo economics" and limits its capacity sufficiently, it is in the incumbent's interest to accommodate entry. The entrant can increase its profits by selling rights (coupons) to its scarce discount output. If the entrant is less efficient, the incumbent will choose to serve coupon holders at the discount price. When this occurs, the entrant sells coupons but no output, and industry production is rationalized.

Suggested Citation

  • Judith R. Gelman & Steven C. Salop, 1983. "Judo Economics: Capacity Limitation and Coupon Competition," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 315-325, Autumn.
  • Handle: RePEc:rje:bellje:v:14:y:1983:i:autumn:p:315-325
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0361-915X%28198323%2914%3A2%3C315%3AJECLAC%3E2.0.CO%3B2-A&origin=repec
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rje:bellje:v:14:y:1983:i:autumn:p:315-325. 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: (). General contact details of provider: https://www.rje.org .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.