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Strategic Advertising for Entry Deterrence Purposes

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Abstract

This paper evaluates the possible effects of advertising on conditions of entry in a market with one incumbent and one potential entrant. Through a game-theoretic framework, it is shown that the use of pre-entry advertising expenditures (which are supposed to exhibit diminishing returns) may discourage entry even when firms behave rationally and face the same conditions of cost and demand.

Suggested Citation

  • Paolo Coccorese, 2001. "Strategic Advertising for Entry Deterrence Purposes," CELPE Discussion Papers 61, CELPE - Centre of Labour Economics and Economic Policy, University of Salerno, Italy.
  • Handle: RePEc:sal:celpdp:61
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    Keywords

    market structure; advertising;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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