Strategic Alliances, Shared Facilities, and Entry Deterrence

Posted: 30 Jun 2000

See all articles by Zhiqi Chen

Zhiqi Chen

Carleton University - Department of Economics

Thomas W. Ross

University of British Columbia (UBC) - Sauder School of Business

Abstract

We explore some possible anticompetitive effects of one particular type of strategic alliance--common in the airline industry, among others--that involves the sharing of production capacity. An offer to share an existing facility can allow an incumbent to persuade a potential entrant not to build its own facility. We establish conditions under which an agreement to share will be anticompetitive in the sense that, absent the agreement, a more competitive outcome (i.e., entry with new capacity) would have obtained. Such alliances can reduce welfare even if the incumbent and entrant will not be direct competitors.

JEL Classification: L12, L13

Suggested Citation

Chen, Zhiqi and Ross, Thomas, Strategic Alliances, Shared Facilities, and Entry Deterrence. Available at SSRN: https://ssrn.com/abstract=228764

Zhiqi Chen

Carleton University - Department of Economics ( email )

1125 Colonel By Drive
Ottawa, Ontario K1S 5B6
Canada

Thomas Ross (Contact Author)

University of British Columbia (UBC) - Sauder School of Business ( email )

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Vancouver, BC V6T 1Z2
Canada
(604) 822-8500 (Phone)
(604) 822-8521 (Fax)

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