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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|Date of creation:||1998|
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- Crampes, Claude & Hollander, Abraham, 1993.
"Umbrella Pricing to Attract Early Entry,"
London School of Economics and Political Science, vol. 60(240), pages 465-74, November.
- Crampes, C. & Hollander, A., 1990. "Umbrella Pricing To Attract Early Entry," Cahiers de recherche 9006, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Crampes, C. & Hollander, A., 1990. "Umbrella Pricing to Attract Early Entry," Cahiers de recherche 9006, Universite de Montreal, Departement de sciences economiques.
- James Brander & Jonathan Eaton, 1982.
"Product Line Rivalry,"
519, Queen's University, Department of Economics.
- Martinez-Giralt, Xavier & Neven, Damien J, 1988. "Can Price Competition Dominate Market Segmentation?," Journal of Industrial Economics, Wiley Blackwell, vol. 36(4), pages 431-42, June.
- Neven, Damien J., 1987. "Endogenous sequential entry in a spatial model," International Journal of Industrial Organization, Elsevier, vol. 5(4), pages 419-434.
- 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.
- Gillian K. Hadfield, 1991. "Credible Spatial Preemption through Franchising," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 531-543, Winter.
- Gallini, Nancy T, 1984. "Deterrence by Market Sharing: A Strategic Incentive for Licensing," American Economic Review, American Economic Association, vol. 74(5), pages 931-41, December.
- 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.
- Berck, Peter & Perloff, Jeffrey M., 1988. "The dynamic annihilation of a rational competitive fringe by a low-cost dominant firm," Journal of Economic Dynamics and Control, Elsevier, vol. 12(4), pages 659-678, November.
- 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.
- Gilbert, Richard & Vives, Xavier, 1986. "Entry Deterrence and the Free Rider Problem," Review of Economic Studies, Wiley Blackwell, vol. 53(1), pages 71-83, January.
- Bonanno, Giacomo, 1987. "Location Choice, Product Proliferation and Entry Deterrence," Review of Economic Studies, Wiley Blackwell, vol. 54(1), pages 37-45, January.
- Vives, Xavier, 1988. "Sequential entry, industry structure and welfare," European Economic Review, Elsevier, vol. 32(8), pages 1671-1687, October.
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