Entry deterrence and experimentation under demand uncertainty

Jain, N. (2011). Entry deterrence and experimentation under demand uncertainty. International Journal of Industrial Organization, 29(4), pp. 464-472. doi: 10.1016/j.ijindorg.2010.09.001

[img]
Preview
Text - Accepted Version
Available under License : See the attached licence file.

Download (2MB) | Preview
[img]
Preview
Text (Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Licence) - Other
Download (201kB) | Preview

Abstract

We examine the effect of a threat of entry on experimentation about demand by an incumbent monopolist when there is a fixed cost of entry. We show that experimentation may itself be used as a tool for entry deterrence and derive conditions under which experimentation reduces the probability of entry. These conditions depend on the entry rule which in turn depends on entry costs. We show that if experimentation does not deter entry, the monopolist incumbent experiments less. We also characterize experimentation and entry in the linear-uniform example, and show that cost of entry and experimentation do not have a monotonic relationship. © 2010 Elsevier B.V.All rights reserved.

Item Type: Article
Additional Information: © 2011 Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/
Subjects: H Social Sciences > HB Economic Theory
Divisions: School of Social Sciences > Department of Economics
URI: http://openaccess.city.ac.uk/id/eprint/14217

Actions (login required)

View Item View Item

Downloads

Downloads per month over past year

View more statistics