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Entry Deterrence and Entry Accommodation Strategies of a Multiproduct Firm Regulated with Dynamic Price Cap

  • Paula Sarmento

    ()

    (CETE, Faculdade de Economia, Universidade do Porto)

  • António Brandão

    ()

    (CETE, Faculdade de Economia, Universidade do Porto)

In this paper we study the way a multiproduct firm, regulated through a dynamic price cap, can develop a price strategy that uses the regulatory policy to deter entry. We consider a firm that initially operates as a monopolist in two markets but faces potential entry in one of the markets. We conclude that the regulated firm can have the incentive to block the entry. This strategy leads to the reduction of the price in both markets. However, the final effect of the entry deterrence strategy on total consumer surplus is not always positive.

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Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series CEF.UP Working Papers with number 0502.

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Length: 33 pages
Date of creation: May 2005
Date of revision:
Handle: RePEc:por:cetedp:0502
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