Credible Retaliatory Entry and Strategic Toe-Holds
Carleton University - Department of Economics
Thomas W. Ross
University of British Columbia
The Journal of Industrial Economics, Vol. 57, Issue 2, pp. 343-352, June 2009
The anticipated profits from entry by an established firm into a new market will depend on how incumbents in that market are expected to respond. One possibility, suggested by cases and the literature, is that an incumbent may respond with ‘retaliatory entry’ into the first entrant's ‘home’ market. The model presented here describes conditions under which this can be a credible threat that deters the first entry. When the conditions are such that it is not credible, the paper shows how firms can provide credibility through the establishment of toe-hold investments in other markets.
Number of Pages in PDF File: 10Accepted Paper Series
Date posted: May 20, 2009
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