Credible Retaliatory Entry and Strategic Toe-Holds

10 Pages Posted: 20 May 2009

See all articles by Zhiqi Chen

Zhiqi Chen

Carleton University - Department of Economics

Thomas W. Ross

University of British Columbia (UBC)

Abstract

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.

Suggested Citation

Chen, Zhiqi and Ross, Thomas W., Credible Retaliatory Entry and Strategic Toe-Holds. The Journal of Industrial Economics, Vol. 57, Issue 2, pp. 343-352, June 2009. Available at SSRN: https://ssrn.com/abstract=1407313 or http://dx.doi.org/10.1111/j.1467-6451.2009.00376.x

Zhiqi Chen (Contact Author)

Carleton University - Department of Economics ( email )

1125 Colonel By Drive
Ottawa, Ontario K1S 5B6
Canada

Thomas W. Ross

University of British Columbia (UBC) ( email )

2329 West Mall
Vancouver, British Columbia BC V6T 1Z4
Canada

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