Entry, Entry-Deterrence and Exit: A Study of the Market for CFCs.

A model of exit from a market for an environmentally harmful intermediate product is developed. An atomistic structure of the demand side keeps firms in a technology trap. An oligopolistic structure of the demand side helps reduce the initial losses of market entry with a new less harmful product by reducing customer selection costs and granting production experience effects. Information intermediaries on the demand side further reduce transaction costs and help provide installed-base effects which protect first-mover profits of the entrant against competitive reaction of the incumbent firms. Copyright 1998 by WWZ and Helbing & Lichtenhahn Verlag AG