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Entry Deterrence in the Presence of Learning-by-Doing

Author

Listed:
  • Ana Espinola-Arredondo
  • Felix Munoz-Garcia

    () (School of Economic Sciences, Washington State University)

Abstract

This paper investigates a signaling entry deterrence model under learning-by-doing. We show that a monopolist’s practice of entry deterrence imposes smaller welfare losses (or larger welfare gains) when learning effects are present than when they are absent, making the intervention of antitrust authorities less urgent. If, however, the welfare loss associated to entry deterrence is still significant, and thus intervention is needed, our paper demonstrates that the incumbent’s practice of entry deterrence is easier to detect by a regulator who does not have access to accurate information about the incumbent’s profit function. Learning-by-doing hence facilitates the regulator’s ability to detect entry deterrence, thus suggesting its role as an “ally” of antitrust authorities.

Suggested Citation

  • Ana Espinola-Arredondo & Felix Munoz-Garcia, 2010. "Entry Deterrence in the Presence of Learning-by-Doing," Working Papers 2010-11, School of Economic Sciences, Washington State University.
  • Handle: RePEc:wsu:wpaper:espinola-6
    as

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    File URL: http://faculty.ses.wsu.edu/WorkingPapers/AnaEspinola/WP2010-11.pdf
    File Function: First version, 2010
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    References listed on IDEAS

    as
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    4. Barrett, Scott, 1994. "Self-Enforcing International Environmental Agreements," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 878-894, Supplemen.
    5. Ana Espinola-Arredondo, 2009. "Free-Riding and Cooperation in Environmental Games," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(1), pages 119-158, February.
    6. Michael Hoel & Kerstin Schneider, 1997. "Incentives to participate in an international environmental agreement," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 9(2), pages 153-170, March.
    7. Putnam, Robert D., 1988. "Diplomacy and domestic politics: the logic of two-level games," International Organization, Cambridge University Press, vol. 42(03), pages 427-460, June.
    8. Rubio, Santiago J. & Ulph, Alistair, 2007. "An infinite-horizon model of dynamic membership of international environmental agreements," Journal of Environmental Economics and Management, Elsevier, vol. 54(3), pages 296-310, November.
    9. Scott Barrett, 1994. "The biodiversity supergame," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 4(1), pages 111-122, February.
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    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Learning-by-doing; Entry deterrence; Incomplete information; Spillovers;

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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