The Effect of Exit on Entry Deterrence Strategies
28 Pages Posted: 17 Oct 2001
Date Written: September 17, 2001
Recent analyses of entry deterrence strategies have required an incumbent's post-entry output or pricing strategy to be profit maximizing. However, most papers have continued to assume that either an incumbent can commit not to exit after entry or that exit is never optimal. When there are avoidable fixed costs of operating in any period, however, exit can be the optimal strategy. In this situation, entry deterrence strategies operate very differently than when exit is never optimal. In fact, the possibility of exit can make some, previously effective, strategies completely ineffective while improving the effectiveness of others.
Keywords: Exit, Entry Deterrence
JEL Classification: L10, L12
Suggested Citation: Suggested Citation