A Note on Credible Spatial Preemption in an Entry-Exit Game
University of California, Berkeley - Department of Economics
August 21, 2012
I investigate how an incumbent firm deters entry by crowding the market, even when the incumbent can withdraw its stores in response to entry. In a two-location model, Judd (1985) shows such spatial entry deterrence is not credible. In contrast, I demonstrate spatial preemption can be credibly employed in a circular-city model if the incumbent can build its stores on sufficiently many locations and transportation costs are linear.
Number of Pages in PDF File: 6
Keywords: Spatial Preemption, Entry Deterrence, Product Differentiation
JEL Classification: C72, D42, L12working papers series
Date posted: August 26, 2011 ; Last revised: August 22, 2012
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