Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5098156 | Journal of Economic Dynamics and Control | 2016 | 27 Pages |
Abstract
We show that due to hidden competition the follower is more eager to invest. As a result, an entry deterrence strategy of the leader becomes more costly, and it can only be implemented for smaller market size, leaving additional room for entry accommodation. The leader has incentives to prevent entry of the hidden competitor stimulating simultaneous investment if the hidden firm has a large capacity, and has more incentives to apply entry deterrence in the complementary case of a small capacity of the hidden player. In the first case overinvestment aimed to deter the follower׳s entry does not occur for a wide range of parameters values.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Maria N. Lavrutich, Kuno J.M. Huisman, Peter M. Kort,