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Strategic Investment and Market Integration

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  • Ganslandt, Mattias

    () (The Research Institute of Industrial Economics)

Abstract

The competitive effect of international market integration in industries with imperfect competition is of great policy interest. This paper focuses on the link between monopolization and market segmentation. It presents a model of multi-market entry deterrence with or without market commitments. We derive sufficient conditions for entry deterrence with productive capacity in the multi-market game. It is shown that to deter entry in the multi-market game, the first-mover installs productions capacity which is strictly larger than the capacity needed to deter entry, if it is possible to assign parts of the capacity to specific markets. Market integration for production capacity may, thus, have a pro-competitive effect in international markets.

Suggested Citation

  • Ganslandt, Mattias, 2001. "Strategic Investment and Market Integration," Working Paper Series 560, Research Institute of Industrial Economics.
  • Handle: RePEc:hhs:iuiwop:0560
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    References listed on IDEAS

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    2. Horstmann, Ignatius J & Markusen, James R, 1987. "Strategic Investments and the Development of Multinationals," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(1), pages 109-121, February.
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    4. Venables, Anthony J., 1990. "International capacity choice and national market games," Journal of International Economics, Elsevier, vol. 29(1-2), pages 23-42, August.
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    6. Bunch, David S & Smiley, Robert, 1992. "Who Deters Entry? Evidence on the Use of Strategic Entry Deterrents," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 509-521, August.
    7. Smith, Alasdair, 1987. "Strategic investment, multinational corporations and trade policy," European Economic Review, Elsevier, vol. 31(1-2), pages 89-96.
    8. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
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    10. Dan Kovenock & Raymond Deneckere & Tom Faith & Beth Allen, 2000. "Capacity precommitment as a barrier to entry: A Bertrand-Edgeworth approach," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 15(3), pages 501-530.
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    12. A. M. Spence, 1981. "The Learning Curve and Competition," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 49-70, Spring.
    13. Gilbert, Richard J & Newbery, David M G, 1982. "Preemptive Patenting and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 72(3), pages 514-526, June.
    14. Brad Barham & Roger Ware, 1993. "A Sequential Entry Model with Strategic Use of Excess Capacity," Canadian Journal of Economics, Canadian Economics Association, vol. 26(2), pages 286-298, May.
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    More about this item

    Keywords

    Entry Deterrence; Multi-Market Competition; Market Integration;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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