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Entry Deterrence in the Commons with Multiple Incumbents

Author

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

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

Abstract

We examine an entry-deterrence model with multiple incumbents who strategically increase their individual appropriation in order to prevent entry. We find that, as the number of incumbents increases entry deterence can only be supported if the resource is abundant. Additionally, we show that entry deterrence yields a welfare improvement, relative to contexts of unthreatened entry, if few firms exploit a moderately abundant resource. When several firms compete, however, welfare losses can arise. Consequently, the presence of several incumbents recommends the implementation of policies that hinder entry under larger conditions than when a single incumbent exploits the commons.

Suggested Citation

  • Ana Espinola-Arredondo & Felix Munoz-Garcia, "undated". "Entry Deterrence in the Commons with Multiple Incumbents," Working Papers 2012-1, School of Economic Sciences, Washington State University.
  • Handle: RePEc:wsu:wpaper:munoz-12
    as

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    File URL: http://faculty.ses.wsu.edu/WorkingPapers/Munoz/WP2012-1.pdf
    File Function: First version, 2012
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    References listed on IDEAS

    as
    1. Apesteguia, Jose, 2006. "Does information matter in the commons?: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 60(1), pages 55-69, May.
    2. Mason, Charles F. & Sandler, Todd & Cornes, Richard, 1988. "Expectations, the commons, and optimal group size," Journal of Environmental Economics and Management, Elsevier, vol. 15(1), pages 99-110, March.
    3. Espínola-Arredondo, Ana & Muñoz-García, Félix, 2011. "Can incomplete information lead to under-exploitation in the commons?," Journal of Environmental Economics and Management, Elsevier, vol. 62(3), pages 402-413.
    4. Polasky, Stephen & Bin, Okmyung, 2001. "Entry Deterrence and Signaling in a Nonrenewable Resource Model," Journal of Environmental Economics and Management, Elsevier, vol. 42(3), pages 235-256, November.
    5. Richard Gilbert & Xavier Vives, 1986. "Entry Deterrence and the Free Rider Problem," Review of Economic Studies, Oxford University Press, vol. 53(1), pages 71-83.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Entry Deterrence; Multiple Incumbents; Common Pool Resources;

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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