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| Author: | Allen, B. |
| Title: | Capacity precommitment as a barrier to entry: a Bertrand- Edgeworth approach |
| Journal: | Economic Theory
2000 : VOL. 15:3, p. 501-530 |
| Index terms: | CAPACITY ECONOMICS THEORIES |
| Language: | eng |
| Abstract: | With few exceptions, the literature on the role of capacity as a strategic entry deterrent has assumed Cournot competition in the post-entry game. In contrast, this paper studies a model in which the incumbent and entrant sequentially precommit to capacity levels before competing in price. Interesting deterrence effects arise because firms need time to build, that is, cannot adjust capacity instantaneously in the post-entry game. |
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