Entry deterrence and dynamic competition. The role of capacity reconsidered

Jean Pierre Benoît; Vijay Krishna

doi:10.1016/0167-7187(91)90060-X

Entry deterrence and dynamic competition. The role of capacity reconsidered

Jean Pierre Benoît
, Vijay Krishna

Economics

Research output: Contribution to journal › Article › peer-review

11 Scopus citations

Abstract

We study a model with sequential capacity choice and entry by firms into an industry. Post-entry competition is long term and firms compete by choosing prices. The complex role played by the capacity choice of the first mover is highlighted. In contrast to the conclusions derived from static or reduced form specifications, entry may be deterred only by choosing a low capacity level and charging a very high price. The arguments are used to provide an explanation of events in the U.S. phosphorus industry.

Original language	English (US)
Pages (from-to)	477-495
Number of pages	19
Journal	International Journal of Industrial Organization
Volume	9
Issue number	4
DOIs	https://doi.org/10.1016/0167-7187(91)90060-X
State	Published - Dec 1991

All Science Journal Classification (ASJC) codes

Industrial relations
Aerospace Engineering
Economics and Econometrics
Economics, Econometrics and Finance (miscellaneous)
Strategy and Management
Industrial and Manufacturing Engineering

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10.1016/0167-7187(91)90060-X

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abstract = "We study a model with sequential capacity choice and entry by firms into an industry. Post-entry competition is long term and firms compete by choosing prices. The complex role played by the capacity choice of the first mover is highlighted. In contrast to the conclusions derived from static or reduced form specifications, entry may be deterred only by choosing a low capacity level and charging a very high price. The arguments are used to provide an explanation of events in the U.S. phosphorus industry.",

author = "Beno{\^i}t, \{Jean Pierre\} and Vijay Krishna",

note = "Funding Information: *We wish to thank Martin Osborne, John Pratt and a referee for helpful comments. Research support was provided by the National Science Foundation (Grant No. SES-8611211) and the Division of Research at the Harvard Business School.",

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AU - Krishna, Vijay

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N2 - We study a model with sequential capacity choice and entry by firms into an industry. Post-entry competition is long term and firms compete by choosing prices. The complex role played by the capacity choice of the first mover is highlighted. In contrast to the conclusions derived from static or reduced form specifications, entry may be deterred only by choosing a low capacity level and charging a very high price. The arguments are used to provide an explanation of events in the U.S. phosphorus industry.

AB - We study a model with sequential capacity choice and entry by firms into an industry. Post-entry competition is long term and firms compete by choosing prices. The complex role played by the capacity choice of the first mover is highlighted. In contrast to the conclusions derived from static or reduced form specifications, entry may be deterred only by choosing a low capacity level and charging a very high price. The arguments are used to provide an explanation of events in the U.S. phosphorus industry.

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UR - https://www.scopus.com/pages/publications/37949042289#tab=citedBy

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Entry deterrence and dynamic competition. The role of capacity reconsidered

Abstract

All Science Journal Classification (ASJC) codes

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