Uncertainty and Entry Deterrence
Posted: 16 Nov 1999
Abstract
We study a model where capacity installation by an incumbent firm serves to deter others from entering the industry. We argue that uncertainty about demand or costs forces the incumbent to choose a higher capacity level than it would under certainty. This higher level diminishes the attractiveness of deterrence (Proposition 1) and, therefore, the range of parameter values for which deterrence occurs (Proposition 2).
JEL Classification: D42, D43, D24
Suggested Citation: Suggested Citation
Maskin, Eric S., Uncertainty and Entry Deterrence. Available at SSRN: https://ssrn.com/abstract=179762
Eric S. Maskin (Contact Author)
Princeton University - Department of Economics ( email )
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