Promoting Lies through Regulation: Deterrence Impacts of Flexible versus Inflexible Policy
This paper investigates the signaling role of tax policy in promoting or hindering the ability of a monopolist to practice entry deterrence. We study contexts in which tax policy is Flexible and inflexible. We show that not only an informative equilibrium can be supported where information is conveyed to the entrant, but also an uninformative equilibrium where information is concealed. In addition, inflexible policies promote information transmission. Therefore, our results identify a potential benefit of inflexible policies, namely, hampering the practice of entry deterrence.
|Date of creation:||Apr 2011|
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- David B. Ridley, 2008.
"Herding versus Hotelling: Market Entry with Costly Information,"
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 17(3), pages 607-631, 09.
- David B. Ridley, 2009. "Herding versus Hotelling: Market Entry with Costly Information," Levine's Working Paper Archive 814577000000000174, David K. Levine.
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