Anti-Limit Pricing

Extending Milgrom and Roberts (1982), we analyze an infinite horizon entry model where an incumbent may use its current price to signal its strength, in order to deter entry. In contrast with conventional limit pricing, we show the entry of weaker firms. We also provide necessary and sufficient conditions for this phenomenon to arise in equilibrium, in the benchmark cases that no second entry is profitable.

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Year of publication:	2010
Authors:	Jun, Byoung Heon ; Park, In-Uck
Published in:	Hitotsubashi Journal of Economics. - Graduate School of Economics. - Vol. 51.2010, 2, p. 1-22
Publisher:	Graduate School of Economics
Subject:	Dynamic Signaling \| Limit Pricing \| Entry Deterrence

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Extent:	application/pdf
Type of publication:	Article
Language:	English
Classification:	D42 - Monopoly ; D43 - Oligopoly and Other Forms of Market Imperfection ; D82 - Asymmetric and Private Information ; L11 - Production, Pricing, and Market Structure Size; Size Distribution of Firms
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10009206366