Abstract
A monopoly facing potential entry may not want to develop an efficient technology even at zero R&D costs. Such a phenomenon occurs if a new technology is distinct from the existing one so production uncertainty becomes technology-specific. Then the monopoly can reduce the entrant's post-entry profit to the point of deterrence by using the existing technology with which the entrant would enter. We show that the monopoly develops a new technology when the entrant faces a sufficiently high or low entry cost but forgoes invention when the entry cost is intermediate. These results hold both in quantity and price competition.
| Original language | English |
|---|---|
| Pages (from-to) | 632-638 |
| Number of pages | 7 |
| Journal | International Journal of Industrial Organization |
| Volume | 27 |
| Issue number | 5 |
| DOIs | |
| State | Published - Sep 2009 |
Keywords
- Correlation of strategies
- Entry cost
- Entry deterrence
- Invention
- Production uncertainty
ASJC Scopus subject areas
- Industrial relations
- Aerospace Engineering
- Economics and Econometrics
- Strategy and Management
- Industrial and Manufacturing Engineering
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