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The Role of Multiple Potential Entrants/Sequential Entry in Noncooperative Entry Deterrence

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  • Michael Waldman

Abstract

A number of authors have recently considered whether the free rider problem is exhibited in models characterized by multiple potential entrants/sequential entry. Bernheim (1984) and Eaton and Ware (1987) find that the free rider problem is not an important factor, while McLean and Riordan (1989) find that it is. In this article I identify a general property whose presence is important for whether a model of noncooperative entry deterrence exhibits a free rider problem, and in this way help clarify why the above-mentioned authors reach these diverse conclusions. The article also demonstrates that quite plausible changes in the specifications of both Bernheim and Eaton and Ware lead to incumbent firms underinvesting in entry deterrence.

Suggested Citation

  • Michael Waldman, 1991. "The Role of Multiple Potential Entrants/Sequential Entry in Noncooperative Entry Deterrence," RAND Journal of Economics, The RAND Corporation, vol. 22(3), pages 446-453, Autumn.
    • Handle: RePEc:rje:randje:v:22:y:1991:i:autumn:p:446-453
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    Citations

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    Cited by:

    1. Dan Kovenock & Suddhasatwa Roy, 2005. "Free Riding in Noncooperative Entry Deterrence with Differentiated Products," Southern Economic Journal, John Wiley & Sons, vol. 72(1), pages 119-137, July.
    2. Cardullo, Gabriele, 2011. "The distributive and welfare effects of product and labour market deregulation," Labour Economics, Elsevier, vol. 18(2), pages 205-217, April.
    3. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899.
    4. Cumbul, Eray & Virág, Gábor, 2018. "Multilateral limit pricing in price-setting games," Games and Economic Behavior, Elsevier, vol. 111(C), pages 250-273.
    5. Ikuo Ishibashi & Noriaki Matsushima, 2006. "Inviting entrants may help incumbent firms," Discussion Papers 2006-46, Kobe University, Graduate School of Business Administration.
    6. Bet, Germán, 2021. "Product specification under a threat of entry: Evidence from Airlines’ departure times," International Journal of Industrial Organization, Elsevier, vol. 75(C).
    7. Dijkstra, Bouwe R., 2007. "An investment contest to influence environmental policy," Resource and Energy Economics, Elsevier, vol. 29(4), pages 300-324, November.
    8. Melkonyan, Tigran A., 2006. "Value of reputation in the chain-store game with multiple incumbents," International Journal of Industrial Organization, Elsevier, vol. 24(2), pages 425-448, March.
    9. Herings, P. Jean-Jacques & Peeters, Ronald & Schinkel, Maarten Pieter, 2005. "Intertemporal market division:: A case of alternating monopoly," European Economic Review, Elsevier, vol. 49(5), pages 1207-1223, July.
    10. Michael Conlin & Vrinda Kadiyali, 2006. "Entry‐Deterring Capacity in the Texas Lodging Industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(1), pages 167-185, March.
    11. Tesoriere, Antonio, 2017. "Stackelberg equilibrium with many leaders and followers. The case of zero fixed costs," Research in Economics, Elsevier, vol. 71(1), pages 102-117.
    12. Tesoriere, Antonio, 2017. "Stackelberg equilibrium with multiple firms and setup costs," Journal of Mathematical Economics, Elsevier, vol. 73(C), pages 86-102.
    13. Melkonian, Tigran A., 1998. "Two essays on reputation effects in economic models," ISU General Staff Papers 1998010108000012873, Iowa State University, Department of Economics.
    14. Church, Jeffrey & Ware, Roger, 1996. "Delegation, market share and the limit price in sequential entry models," International Journal of Industrial Organization, Elsevier, vol. 14(5), pages 575-609, July.

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