Strategic Deterrence of Sequential Entry into an Industry

Industrial entry deterrence is typically studied in a setting where an established firm or firms confront and attempt to deter a single potential competitor. During the evolution of most industries, however, a sequence of firms enters (or attempts to enter) at distinct points in time. Consideration of issues arising from sequential entry fundamentally alters the qualitative nature of the deterrence decision undertaken by incumbent firms. Within a sequential setting, counterintuitive behavior may be observed. Specifically, numerous government policies designed to decrease industrial concentration (penalties for anticompetitive practices, subsidization of entry, consent decrees, restructuring industries) may have the opposite effect.