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Weak Entrants are Welcome

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  • Ashiya, M.

Abstract

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.

Suggested Citation

  • Ashiya, M., 1998. "Weak Entrants are Welcome," ISER Discussion Paper 0468, Institute of Social and Economic Research, Osaka University.
  • Handle: RePEc:dpr:wpaper:0468
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    References listed on IDEAS

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    More about this item

    Keywords

    MARKETS STRUCTURES ; BUSINESS ORGANIZATION ; PROTECTIONISM;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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