When is entry deterrence the wiser strategy for a firm?
This paper examines the idea that if an incumbent firm deviates from short-term profit maximization behavior and deters the entry of a potential entrant at the expense of higher profit, then its own mid-/long-term profit maximization is achieved. The paper confirms the importance of the entry-deterrence behavior of the incumbent firm by using numerical examples of learning by doing.
JEL classification: C72, D21, L20
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