Extending Milgrom and Roberts (1982), we analyze an infinite horizon entry model where an incumbent may use its current price to signal its strength, in order to deter entry. In contrast with conventional limit pricing, we show the entry of weaker firms. We also provide necessary and sufficient conditions for this phenomenon to arise in equilibrium, in the benchmark cases that no second entry is profitable.
(This abstract was borrowed from another version of this item.)
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.:
- Matthews, Steven A & Mirman, Leonard J, 1983.
"Equilibrium Limit Pricing: The Effects of Private Information and Stochastic Demand,"
Econometric Society, vol. 51(4), pages 981-96, July.
- Steven A. Matthews & Leonard J. Mirman, 1981. "Equilibrium Limit Pricing: The Effects of Private Information and Stochastic Demand," Discussion Papers 494, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Overgaard, Per Baltzer, 1994. "Equilibrium effects of potential entry when prices signal quality," European Economic Review, Elsevier, vol. 38(2), pages 367-383, February.
- Byoung Heon Jun & In-Uck Park, 2005.
172782000000000041, UCLA Department of Economics.
- Bagwell, Kyle & Riordan, Michael H, 1991.
"High and Declining Prices Signal Product Quality,"
American Economic Review,
American Economic Association, vol. 81(1), pages 224-39, March.
- B. Douglas Bernheim, 1984. "Strategic Deterrence of Sequential Entry into an Industry," RAND Journal of Economics, The RAND Corporation, vol. 15(1), pages 1-11, Spring.
- 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.
- Oz Shy, 1996. "Industrial Organization: Theory and Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262691795, June.
- Swinkels, Jeroen M, 1999.
"Education Signalling with Preemptive Offers,"
Review of Economic Studies,
Wiley Blackwell, vol. 66(4), pages 949-70, October.
- Kremer, Ilan & Skrzypacz, Andrzej, 2007. "Dynamic signaling and market breakdown," Journal of Economic Theory, Elsevier, vol. 133(1), pages 58-82, March.
- Bagwell, Kyle & Ramey, Garey, 1990. "Advertising and pricing to deter or accommodate entry when demand is unknown," International Journal of Industrial Organization, Elsevier, vol. 8(1), pages 93-113.
- Harrington, Joseph E, Jr, 1986. "Limit Pricing When the Potential Entrant Is Uncertain of Its Cost Function [Limit Pricing and Entry under Incomplete Information: An Equilibrium Analysis]," Econometrica, Econometric Society, vol. 54(2), pages 429-37, March.
- Katharine E. Rockett, 1990. "Choosing the Competition and Patent Licensing," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 161-171, Spring.
- Ashiya, M., 1998.
"Weak Entrants are Welcome,"
ISER Discussion Paper
0468, Institute of Social and Economic Research, Osaka University.
- Cho, In-Koo & Kreps, David M, 1987.
"Signaling Games and Stable Equilibria,"
The Quarterly Journal of Economics,
MIT Press, vol. 102(2), pages 179-221, May.
- Kyle Bagwell & Garey Ramey, 1991.
"Oligopoly Limit Pricing,"
RAND Journal of Economics,
The RAND Corporation, vol. 22(2), pages 155-172, Summer.
- Ayça Kaya, 2005.
"Repeated Signaling Games,"
CIE Discussion Papers
2005-07, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
- 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.
- Noldecke,Georg & van Damme,Eric, 1988.
"Signalling in a dynamic labor market,"
Discussion Paper Serie A
148, University of Bonn, Germany.
When requesting a correction, please mention this item's handle: RePEc:cla:levrem:172782000000000041. 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: (David K. Levine)
If references are entirely missing, you can add them using this form.