Abstract
Recent work has investigated the effects of asymmetric information between an incumbent firm and a potential entrant. This study extends the analysis to allow the initial market structure to be a noncooperative oligopoly. We show that there is a Bayesian Nash equilibrium in which the incumbent firms, although unable to collude, strategically deter entry that would have occurred under complete information. In contrast to the past limit-pricing literature, it is a high price that deters entry as it signals to the potential entrant that this is a high-cost industry. Extending the model to allow for multiple potential entrants, we find that increasing the degree of potential competition raises the preentry price and reduces the likelihood of entry.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
