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Advertising and Entry Deterrence: How the Size of the Market Matters

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  • Bennour, Khaled

Abstract

We analyze the relationship between market size and entry when an incumbent and potentially an entrant compete to gain market share and advertising is the only strategic variable. Entry occurs when the relative effectiveness of incumbent's advertising is smaller than a threshold level that depends on the size of the market. This threshold level is monotonically and positively related to market size. Consequently, equilibrium with entry is more likely the greater is the size of the market.

Suggested Citation

  • Bennour, Khaled, 2007. "Advertising and Entry Deterrence: How the Size of the Market Matters," MPRA Paper 22620, University Library of Munich, Germany, revised Nov 2007.
    • Handle: RePEc:pra:mprapa:22620
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    File URL: https://mpra.ub.uni-muenchen.de/22620/1/MPRA_paper_22620.pdf
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    References listed on IDEAS

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    1. Hirshleifer, Jack, 1995. "Anarchy and Its Breakdown," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 26-52, February.
    2. Scott Morton, Fiona M., 2000. "Barriers to entry, brand advertising, and generic entry in the US pharmaceutical industry," International Journal of Industrial Organization, Elsevier, vol. 18(7), pages 1085-1104, October.
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    Cited by:

    1. Keisuke Hattori & Keisaku Higashida, 2023. "Who should be regulated: Genuine producers or third parties?," Journal of Economics, Springer, vol. 138(3), pages 249-286, April.

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    More about this item

    Keywords

    advertising; entry; market size;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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