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http://ssrn.com/abstract=1285767
 
 

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Threat of Entry, Asymmetric Information and Pricing


Robert Seamans


New York University (NYU) - Leonard N. Stern School of Business

November 22, 2011

NET Institute Working Paper No. 08-13

Abstract:     
This paper examines the impact of asymmetric information on incumbent firms’ propensity to engage in limit pricing when faced with threat of entry. I draw from information economics to argue that incumbents will use price to respond ex ante to entry in situations characterized by asymmetric information. I suggest two situations in which asymmetric information can arise: when potential entrants are from outside the primary industry and when incumbent firms are members of R&D consortia. I then study pricing in the US cable TV industry to show that pricing patterns of incumbent cable TV systems are consistent with limit pricing when the relationship between the incumbent and potential entrant is characterized by asymmetric information.

Number of Pages in PDF File: 50

Keywords: entry, information economics, price, incumbent response, cable TV

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Date posted: October 19, 2008 ; Last revised: June 5, 2013

Suggested Citation

Seamans, Robert, Threat of Entry, Asymmetric Information and Pricing (November 22, 2011). NET Institute Working Paper No. 08-13. Available at SSRN: http://ssrn.com/abstract=1285767 or http://dx.doi.org/10.2139/ssrn.1285767

Contact Information

Robert Seamans (Contact Author)
New York University (NYU) - Leonard N. Stern School of Business ( email )
44 West 4th Street
New York, NY NY 10012
United States
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