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Spatial Competition, Sequential Entry, and Technology choice

This article introduces technology choice into a Hotelling model of spatial competition. This yields two entry deterrence devices, as well as complex strategic choices for the firms and a rich of industry structure. Depending on cost parameters and market size, firms may choose to over-invest or to under-invest. Industry structure is typically asymmetric either in terms of the locations chosen or the technologies used or in both. I find excessive entry deterrrence, second-mover advantage as well as delegation of entry deterrence. Both the number of firms and the equilibrium prices may be non-monotonic in market size. Larger markets may exhibit higher prices.

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File URL: http://homepage.univie.ac.at/Papers.Econ/RePEc/vie/viennp/vie0215.pdf
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Paper provided by University of Vienna, Department of Economics in its series Vienna Economics Papers with number 0215.

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Date of creation: Apr 2002
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Handle: RePEc:vie:viennp:0215
Contact details of provider: Web page: http://www.univie.ac.at/vwl

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  1. Jeffrey R. Campbell & Hugo Hopenhayn, 2003. "Market size matters," Working Paper Series WP-03-12, Federal Reserve Bank of Chicago.
  2. Berry, Steven T, 1992. "Estimation of a Model of Entry in the Airline Industry," Econometrica, Econometric Society, vol. 60(4), pages 889-917, July.
  3. Fudenberg, Drew & Tirole, Jean, 1985. "Preemption and Rent Equilization in the Adoption of New Technology," Review of Economic Studies, Wiley Blackwell, vol. 52(3), pages 383-401, July.
  4. Neven, Damien J., 1987. "Endogenous sequential entry in a spatial model," International Journal of Industrial Organization, Elsevier, vol. 5(4), pages 419-434.
  5. Dixit, Avinash, 1979. "The Role of Investment in Entry-Deterrence," The Warwick Economics Research Paper Series (TWERPS) 140, University of Warwick, Department of Economics.
  6. McLean, Richard P. & Riordan, Michael H., 1989. "Industry structure with sequential technology choice," Journal of Economic Theory, Elsevier, vol. 47(1), pages 1-21, February.
  7. Bresnahan, T.F & Reiss, P.C., 1989. "Entry And Competition In Concentrated Markets," Papers 151, Stanford - Studies in Industry Economics.
  8. Church, Jeffrey & Ware, Roger, 1996. "Delegation, market share and the limit price in sequential entry models," International Journal of Industrial Organization, Elsevier, vol. 14(5), pages 575-609, July.
  9. Tyagi, Rajeev K., 2001. "Cost leadership and pricing," Economics Letters, Elsevier, vol. 72(2), pages 189-193, August.
  10. Donnenfeld, S. & Weber, S., 1991. "Limit Qualities and Entry Deterrence," Papers 92-4, York (Canada) - Department of Economics.
  11. Tabuchi, Takatoshi & Thisse, Jacques-Francois, 1995. "Asymmetric equilibria in spatial competition," International Journal of Industrial Organization, Elsevier, vol. 13(2), pages 213-227.
  12. Schulz, Norbert & Stahl, Konrad, 1985. "On the non-existence of oligopolistic equilibria in differentiated products spaces," Regional Science and Urban Economics, Elsevier, vol. 15(2), pages 229-243, June.
  13. Gupta, Barnali, 1992. "Sequential entry and deterrence with competitive spatial price discrimination," Economics Letters, Elsevier, vol. 38(4), pages 487-490, April.
  14. Pepall, Lynne, 1992. "Strategic Product Choice and Niche Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 1(2), pages 397-417, Summer.
  15. Roger Ware, 1991. "Entry Deterrence," Working Papers 837, Queen's University, Department of Economics.
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