It is well established that incumbent firms may try to deter market entry by pretending to be stronger than they really are. In this article, we show that in some cases an incumbent may prefer the opposite, namely to encourage entry by signaling weakness. If the incumbent cannot deter entry of a...

It is widely recognized that the shape of networks influences both individual and aggregate behavior. This raises the question which types of networks are likely to arise. In this paper we investigate a model of network formation, where players are divided into groups and the costs of a link...