Capacity Precommitment as a Barrier to Entry: A Bertrand-Edgeworth Approach
This paper considers the role of capacity as a strategic entry deterrent for a game in which the incumbent and entrant sequentially precommit to capacity levels before competing in price, possibly using mixed strategies. Depending on the magnitudes of the fixed set-up cost, the cost of capacity, and the relative costs of production, the model produces a wide spectrum of equilibrium behaviors, including some not previously suggested in the literature. Interesting deterrence effects occur because firms need time to build. In contrast to much previous work, the incumbent may hold idle capacity when entry is deterred.
(This abstract was borrowed from another version of this item.)
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||1994|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.krannert.purdue.edu/programs/phd
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dixit, Avinash, 1980.
"The Role of Investment in Entry-Deterrence,"
Royal Economic Society, vol. 90(357), pages 95-106, March.
- Dixit, Avinash, 1979. "The Role of Investment in Entry-Deterrence," The Warwick Economics Research Paper Series (TWERPS) 140, University of Warwick, Department of Economics.
- David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
- Shapiro, Carl, 1989. "Theories of oligopoly behavior," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 6, pages 329-414 Elsevier.
- Spulber, Daniel F, 1981. "Capacity, Output, and Sequential Entry," American Economic Review, American Economic Association, vol. 71(3), pages 503-14, June.
- Basu, Kaushik & Singh, Nirvikar, 1990. "Entry-Deterrence in Stackelberg Perfect Equilibria," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(1), pages 61-71, February.
- Richard E. Levitan & Martin Shubik, 1970.
"Price Duopoly and Capacity Constraints,"
Cowles Foundation Discussion Papers
287, Cowles Foundation for Research in Economics, Yale University.
- Deneckere, R., 1989. "Capacity-Constrained Price Competition When Unit Costs Differ," Purdue University Economics Working Papers 958, Purdue University, Department of Economics.
- Raymond J. Deneckere & Dan Kovenock, 1988.
"Capacity-Constrained Price Competition When Unit Costs Differ,"
861, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Raymond Deneckere & Dan Kovenock, 1994. "Capacity-Constrained Price Competition when Unit Costs Differ," Industrial Organization 9411001, EconWPA, revised 15 Nov 1994.
- Deneckere, R.J. & Kovenock, D., 1994. "Capacity Constrained Price Competition when Unit Costs Differ," Purdue University Economics Working Papers 1056, Purdue University, Department of Economics.
- Kydland, Finn E & Prescott, Edward C, 1982.
"Time to Build and Aggregate Fluctuations,"
Econometric Society, vol. 50(6), pages 1345-70, November.
- Finn E. Kydland & Edward C. Prescott, 1982. "Executable program for "Time to Build and Aggregate Fluctuations"," QM&RBC Codes 4, Quantitative Macroeconomics & Real Business Cycles.
- Finn E. Kydland & Edward C. Prescott, 1982. "Web interface for "Time to Build and Aggregate Fluctuations"," QM&RBC Codes 4a, Quantitative Macroeconomics & Real Business Cycles.
- Allen, Beth, 1993. "Capacity precommitment as an entry barrier for price-setting firms," International Journal of Industrial Organization, Elsevier, vol. 11(1), pages 63-72, March.
- Deneckere, Raymond J & Kovenock, Dan, 1992.
Review of Economic Studies,
Wiley Blackwell, vol. 59(1), pages 143-62, January.
- Saloner, Garth, 1985. "Excess capacity as a policing device," Economics Letters, Elsevier, vol. 18(1), pages 83-86.
- Dixon, Huw, 1985. "Strategic Investment in an Industry with a Competitive Product Market," Journal of Industrial Economics, Wiley Blackwell, vol. 33(4), pages 483-99, June.
- Franco Modigliani, 1958. "New Developments on the Oligopoly Front," Journal of Political Economy, University of Chicago Press, vol. 66, pages 215.
- Allen, Beth & Hellwig, Martin, 1986. "Price-Setting Firms and the Oligopolistic Foundations of Perfect Competition," American Economic Review, American Economic Association, vol. 76(2), pages 387-92, May.
- A. Michael Spence, 1977. "Entry, Capacity, Investment and Oligopolistic Pricing," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 534-544, Autumn.
- Bulow, Jeremy & Geanakoplos, John & Klemperer, Paul, 1985. "Holding Idle Capacity to Deter Entry [The Role of Investment in Entry Deterrence]," Economic Journal, Royal Economic Society, vol. 95(377), pages 178-82, March.
- Joseph E. Stiglitz, 1987. "Technological Change, Sunk Costs, and Competition," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3), pages 883-947.
- Carl Davidson & Raymond Deneckere, 1986. "Long-Run Competition in Capacity, Short-Run Competition in Price, and the Cournot Model," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 404-415, Autumn.
- Fudenberg, Drew & Tirole, Jean, 1984. "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review, American Economic Association, vol. 74(2), pages 361-66, May.
When requesting a correction, please mention this item's handle: RePEc:pur:prukra:1062. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Krannert PHD)
If references are entirely missing, you can add them using this form.