Entry Deterrence in the Commons with Multiple Incumbents
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.
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- Apesteguia, Jose, 2006. "Does information matter in the commons?: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 60(1), pages 55-69, May.
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- 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)
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