Weak Entrants are Welcome
This paper investigates the decision problem of an incumbent firm confronted by both a weak and a strong entrant in a differentiated market. Suppose that the incumbent can deter entry of the weak firm, but cannot deter entry of the strong firm by itself. Then the incumbent may allow entry of the weak firm and use it to alter the strong firm's entry decision. The present paper formalizes this idea, and it sheds new light on the fact that domestic firms are sometimes able to block strong foreign firms after trade loberalization. The idea also expalins why a dominant firm lets fringe firms be in the market.
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- Edward C. Prescott & Michael Visscher, 1977. "Sequential Location among Firms with Foresight," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 378-393, Autumn.
- Ashiya, M., 1998.
"Weak Entrants are Welcome,"
ISER Discussion Paper
0468, Institute of Social and Economic Research, Osaka University.
- Crampes, C. & Hollander, A., 1990.
"Umbrella Pricing To Attract Early Entry,"
Cahiers de recherche
9006, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
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- Berck, Peter & Perloff, Jeffrey M, 1987.
"The Dynamic Annihilation of a Rational Competitive Fringe by a Low-cost Dominant Firm,"
Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series
qt6926m79z, Department of Agricultural & Resource Economics, UC Berkeley.
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- Richard Gilbert & Xavier Vives, 1986. "Entry Deterrence and the Free Rider Problem," Review of Economic Studies, Oxford University Press, vol. 53(1), pages 71-83.
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- Vives, Xavier, 1988. "Sequential entry, industry structure and welfare," European Economic Review, Elsevier, vol. 32(8), pages 1671-1687, October.
- Gillian K. Hadfield, 1991. "Credible Spatial Preemption through Franchising," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 531-543, Winter.
- Brander, James A & Eaton, Jonathan, 1984.
"Product Line Rivalry,"
American Economic Review,
American Economic Association, vol. 74(3), pages 323-34, June.
- Ashiya, M., 1999. "Brand Proliferation is Useless to Deter Entry," ISER Discussion Paper 0476, Institute of Social and Economic Research, Osaka University.
- Martinez-Giralt, Xavier & Neven, Damien J, 1988. "Can Price Competition Dominate Market Segmentation?," Journal of Industrial Economics, Wiley Blackwell, vol. 36(4), pages 431-442, June.
- 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.
- Elie Appelbaum & Chin Lim, 1985. "Contestable Markets under Uncertainty," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 28-40, Spring.
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