Entry, Pricing, and Product Design in an Initially Monopolized Market
We analyze entry, pricing, and product design in a model with differentiated products. Market equilibrium can be "separating," with multiple sellers and a sorting of heterogeneous consumers across goods, or "exclusionary," with one seller serving all customer types. Entry into an initially monopolized market can occur because of cost reductions or product improvements, but entry need not lower the incumbent's price, improve efficiency, or raise consumer welfare. Postentry design incentives favor a softening of price competition and stronger market segmentation, whereas exclusionary design changes typically raise consumer welfare. Potential, as distinct from actual, entry always benefits consumers.
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.:
- Richard G. Frank & David S. Salkever, 1997.
"Generic Entry and the Pricing of Pharmaceuticals,"
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 6(1), pages 75-90, 03.
- Richard G. Frank & David S. Salkever, 1995. "Generic Entry and the Pricing of Pharmaceuticals," NBER Working Papers 5306, National Bureau of Economic Research, Inc.
- Kenneth L. Judd, 1985. "Credible Spatial Preemption," RAND Journal of Economics, The RAND Corporation, vol. 16(2), pages 153-166, Summer.
- Kenneth L. Judd, 1983. "Credible Spatial Preemption," Discussion Papers 577, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
- Michael B. Ward & Jay P. Shimshack & Jeffrey M. Perloff & J. Michael Harris, 2002. "Effects of the Private-Label Invasion in Food Industries," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(4), pages 961-973.
- Ward, Michael B. & Shimshack, Jay P. & Perloff, Jeffrey M. & Harris, J. Michael, 2002. "Effects of the private-label invasion in food industries," MPRA Paper 22186, University Library of Munich, Germany.
- Richard Schmalensee, 1978. "Entry Deterrence in the Ready-to-Eat Breakfast Cereal Industry," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 305-327, Autumn.
- Umbeck, John, 1980. "Shipping the Good Apples Out: Some Ambiguities in the Interpretation of "Fixed Charge"," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 199-208, February.
- Perloff, Jeffrey M. & Suslow, Valerie Y. & Seguin, Paul J., 1995. "Higher Prices from Entry: Pricing of Brand-Name Drugs," Competition Policy Center, Working Paper Series qt1ts674n2, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
- Perloff, Jeffrey M. & Suslow, Valerie Y. & Seguin, Paul J., 1996. "Higher Prices from Entry: Pricing of Brand-Name Drugs," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt1sh175fc, Department of Agricultural & Resource Economics, UC Berkeley.
- Perloff, Jeffrey M. & Suslow, Valerie Y. & Seguin, Paul J., 1995. "Higher Prices from Entry: Pricing of Brand-Name Drugs," Competition Policy Center, Working Paper Series qt75g4k1nt, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
- Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 3-13.
- Timothy F. Bresnahan & Peter C. Reiss, 1990. "Entry in Monopoly Market," Review of Economic Studies, Oxford University Press, vol. 57(4), pages 531-553.
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
- d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-1150, September.
- d'ASPREMONT, Claude & GABSZEWICZ, Jean J. & THISSE, Jacques-François, "undated". "On Hotelling's "Stability in competition"," CORE Discussion Papers RP 385, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Steven J. Davis & Jack MacCrisken & Kevin M. Murphy, 2001. "Economic Perspectives on Software Design: PC Operating Systems and Platforms," NBER Working Papers 8411, National Bureau of Economic Research, Inc.
- Economides, Nicholas, 1986. "Minimal and maximal product differentiation in Hotelling's duopoly," Economics Letters, Elsevier, vol. 21(1), pages 67-71.
- Raymond J. Deneckere & R. Preston McAfee, 1996. "Damaged Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 5(2), pages 149-174, 06.
- Deneckere, R. & McAfee, R.P., 1995. "Damaged Goods," Working papers 9508, Wisconsin Madison - Social Systems.
- repec:cdl:agrebk:5326 is not listed on IDEAS
- Eaton, B Curtis & Lipsey, Richard G, 1979. "The Theory of Market Pre-emption: The Persistence of Excess Capacity and Monopoly in Growing Spatial Markets," Economica, London School of Economics and Political Science, vol. 46(182), pages 149-158, May. Full references (including those not matched with items on IDEAS)