Noncooperative Entry Deterrence, Uncertainty, and the Free Rider Problem
Previous authors who have considered the issue of noncooperative entry deterrence have not found the free-rider problem to be a significant factor. These authors, however, have only considered models in which the exact investment needed to deter entry is known with certainty. The author adds uncertainty to the models investigated by these previous authors, and demonstrates that the free-rider problem can be significant. That is, for certain types of entry deterring investments the introduction of uncertainty causes the oligopoly to underinvest in entry deterrence; however, for other types no underinvestment result arises. Copyright 1987 by The Review of Economic Studies Limited.
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