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A Sequential Entry Model with Strategic Use of Excess Capacity

Author

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  • Brad Barham
  • Roger Ware

Abstract

A model of sequential entry with Leontief costs is studied in which demand is iso-elastic. Some or all firms may hold excess capacity in the perfect equilibrium to the entry game. Firms with a first mover advantage trade off the positioning value of a large investment in capacity, leading to a large market share, against the possible costs of bearing the burden of entry deterrence through holding excess capacity in equilibrium.

Suggested Citation

  • Brad Barham & Roger Ware, 1991. "A Sequential Entry Model with Strategic Use of Excess Capacity," Working Papers 835, Queen's University, Department of Economics.
  • Handle: RePEc:qed:wpaper:835
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    File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_835.pdf
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    References listed on IDEAS

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    1. Gupta, Kanhaya L, 1971. "Aggregation Bias in Linear Economic Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 12(2), pages 293-305, June.
    2. repec:qed:wpaper:37 is not listed on IDEAS
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    Cited by:

    1. Ganslandt, Mattias, 2001. "Strategic Investment and Market Integration," Working Paper Series 560, Research Institute of Industrial Economics.
    2. Özelkan, Ertunga C. & ÇakanyIldIrIm, Metin, 2009. "Reverse bullwhip effect in pricing," European Journal of Operational Research, Elsevier, vol. 192(1), pages 302-312, January.
    3. James G. Mulligan, 2006. "Endogenously determined Quality and Price In a Two-Sector Competitive Service Market With an Application to Down-Hill Skiing," Working Papers 06-01, University of Delaware, Department of Economics.
    4. Dijkstra, Bouwe R., 2007. "An investment contest to influence environmental policy," Resource and Energy Economics, Elsevier, vol. 29(4), pages 300-324, November.
    5. Aniruddha Bagchi & Arijit Mukherjee, 2011. "Commitment and excess capacity with licensing: an old debate with a new look," Journal of Economics, Springer, vol. 103(2), pages 133-147, June.

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