Entry deterrence and dynamic competition. The role of capacity reconsidered

Jean Pierre Benoît, Vijay Krishna

Research output: Contribution to journalArticlepeer-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 languageEnglish (US)
Pages (from-to)477-495
Number of pages19
JournalInternational Journal of Industrial Organization
Volume9
Issue number4
DOIs
StatePublished - 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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