Potential Entrants Research Articles

Decision Analysis of Game Behavior for the Fresh Food Industry: Potential Entrants, Incumbents and Consumers

This paper conducts a decision analysis of game behavior for the fresh food industry, including potential entrants, incumbents and consumers. Potential entrants are the key research object in the analysis of game behavior. The Stackelberg model, considering the uncertainty of market, consumer preference, freshness and greenness of fresh products, is used to analyze the best entry strategies for potential entrants. This paper then establishes an evolutionary game model to further analyze the most optimal entry mode of potential entrants. The combination of two game models can help potential entrants determine the optimal price, output, product freshness, greenness and sales channels.

Potential Competition and the 2023 Merger Guidelines

The 2023 Merger Guidelines devote a section to mergers that eliminate potential competition. This is an important contribution because agency guidelines have not discussed the subject in detail for almost 50 years. The new Guidelines follow the traditional distinction that has been upheld in the courts between a merger’s effects on incumbent responses to perceived potential competition and the potential effects of actual entry. Antitrust enforcement should assess both possible aspects of potential competition in an integrated fashion because harm from a merger occurs not infrequently from the elimination of actual potential competition; and when the elimination of perceived potential competition has an effect, it often occurs along with and as a consequence of the elimination of actual potential competition. Economic studies suggest that the benefits of perceived potential competition are less than some courts have assumed and that the benefits of actual potential competition are greater. Rather than focusing solely on the probability of harm from the elimination of a potential entrant, antitrust enforcement should adopt a sliding scale that takes into account the magnitude of the benefits for consumers or suppliers if entry is successful. Mergers with potential and nascent competitors can be harmful even if the probability of actual entry absent the merger is small.

A Financial Analysis of Ryanair in UK Market

This report evaluates external environment and internal environment of Ryanair. It has certain competitiveness in the UK market, but it still faces challenges from potential entrants, suppliers, buyers, substitutes and industry competitiveness. In order to remain competitive in the market and meet customer needs, Ryanair airlines need to continuously innovate and improve services, while establishing long-term and stable cooperative relationships with partners to achieve sustainable development. The conclusion is that Ryanair has recovered from the pandemic downturn in 2023 financial year. Its risks are identified and risk management measures are analysed. First, Ryanair faces legal risks as it faces increasingly complex data protection laws and regulations. Second, in a highly competitive industry, the company faces operational risk from being exposed to significant price and other pressures. Third, Ryanair faces financial risks. Fourth, Ryanair faces cybersecurity risks and may incur increasing costs to minimize these risks. Within the company, Ryanair has established a clear functional organizational structure and clear division of responsibilities and authorities including the appointment of head of internal audit and the chief risk officer. Ryanair has implemented a risk management program across the company, with senior management responsible for reviewing and monitoring the financial and non-financial controls in place to manage risks to the business.

Evolution of the Merger Guidelines: Is This Fox Too Clever by Half?

The 2023 Merger Guidelines make some notable improvements over the 2010 Horizontal Merger Guidelines. They give greater emphasis to the idea that predicting the competitive effects of a proposed merger is inherently difficult and that to block a merger the government need only show a risk that the merger may substantially lessen competition – not that it will do so. They also give greater emphasis to dynamic competition and innovation – especially with regard to acquisitions of potential entrants – and they add useful material on multi-sided platforms. However, the treatment of market definition in the 2023 Merger Guidelines may weaken horizontal merger enforcement by demoting the role of the “hypothetical monopolist test,” which is used to define markets for the purpose of measuring market shares, and by removing extensive material from prior guidelines that explained why market shares measured in narrower markets tend to be more informative than market shares measured in broader markets. The 2023 Merger Guidelines lower the market concentration thresholds that trigger a presumption by the antitrust enforcement agencies that a merger may substantially lessen competition, but the enforcement data suggest that change will have little effect in practice. The 2023 Merger Guidelines also may lead to less effective deterrence of harmful mergers because they are not well targeted at the mergers that are most likely to substantially lessen competition. One cannot prioritize everything.

Entry under placement uncertainty

We present a model of firm entry in an industry that operates under an aggregate production quota or cap-and-trade (CAT) regulation. Firms are heterogeneous in their own productivity; each knows its costs of production but is uncertain about where its costs rank among an entrant population. We show the existence of a unique, symmetric, dominance solvable, Bayesian Nash equilibrium in switching strategies in a parameterized game with a continuum of players. Our main result is that uncertainty over one's productivity rank is sufficient to cause socially inefficient over-entry when the average cost in the population of potential entrants is low. We find socially inefficient under-entry when the opposite conditions hold. Within both the class of models on global games with strategic substitutes and the class of models on firm entry, our model offers innovative insights into inefficient over-entry, under-entry, and introduces a novel underlying mechanism that drives entry bias.

Antibacterial and anticancer activities of Nymphaea nauchali rhizome extracts

The present study was conducted to discover the antibacterial and anticancer activities of Nymphaea nauchali rhizome peel and core extracts. Antibacterial activity of ethanol, methanol, and acetone extracts of N. nauchali rhizome peel and inner core extracts has been tested against six biofilm-forming bacterial pathogens, E. coli, P. aeruginosa, E. faecalis, coagulase –ve Staph. aureus, Staph. aureus, and P. vulgaris by agar well diffusion assay. The size of inhibition zones around the wells in the presence of different extracts was used to determine the sensitivity of test bacteria. The anticancer activity of extracts was checked using the MCF-7 cell line, and potency was defined in terms of IC50 values. Methanol, ethanol, and acetone peel extracts showed more antibacterial activities against all test bacteria than inner core extracts. E. faecalis was highly resistant to acetone inner core extracts, and P. aeruginosa showed higher sensitivity to ethanol inner core extract. Ethanolic extracts of rhizome peel and inner core were more effective against the MCF-7 cell line than methanol and acetone extracts. IC50 values of 208.20 μgml−1and 136.16 μgml−1were noted for peel and inner core ethanol extracts, respectively. N. nauchali rhizome can be used as a potential entrant in developing novel antibacterial and anticancer phytoformulations.

Entry accommodation strategies in a shipping supply chain with corporate social responsibility

Carriers often enter new shipping markets and undertake corporate social responsibility (CSR) activities to attract more shippers. CSR generally refers to the integration of social and environmental factors by a firm into its business decision-making. This paper constructs a shipping supply chain composed of one port, one carrier, and one potential entrant carrier, where both carriers are committed to CSR activities. Two possible channel structures of the incumbent supply chain are considered: centralization and decentralization. Under both structure settings, we study the entry strategy of the entrant, accommodation strategy of the port, and impacts of entry on consumer surplus and social welfare. Our results show that (i) the entry and accommodation strategies depend on the CSR levels of carriers; (ii) downstream entry improves social welfare under centralization but may decrease it under decentralization; (iii) the entrant has more incentive to enter under decentralization than under centralization when the incumbent carrier has a high CSR level. However, the port might have less incentive to accommodate entry under decentralization; (iv) channel decentralization may improve consumer surplus and social welfare when the port accommodates the entry, while hurts these when the port deters the entry. Additionally, we find that under the case of endogenous CSR level, the entry and accommodation strategies depend on the CSR investment cost coefficient; and the entrant has a stronger entering incentive under uniform pricing than under differentiated pricing if the incumbent carrier has a low CSR level.

Strategic Technology Innovation of a Basic Product in an E-Commerce Platform Supply Chain with a Potential Entrant in a Complementary Goods Market

This paper examines the impact of a potential entrant’s entry into the complementary goods market on the technology innovation of the basic product. We focus on an e-commerce platform supply chain comprising a manufacturer, an e-commerce platform, and a potential entrant. The manufacturer distributes a basic product and a complementary product through the e-commerce platform. The manufacturer has the option to improve the quality of the basic product through technology innovation. The determination of whether the potential entrant enters the market for complementary goods is contingent upon its observation of the manufacturer’s technology innovation strategy. Upon the potential entrant’s entry into this market, competition ensues between the potential entrant and the manufacturer in the realm of the complementary goods market. Our findings reveal a trade-off: on the one hand, the manufacturer’s decision to forgo technology innovation results in reduced profit, while, on the other hand, technology innovation attracts the potential competitor to enter the complementary goods market, which also leads to decreased profit. Under certain circumstances, the loss incurred by the former is less than that incurred by the latter. Consequently, the manufacturer may choose to forego technology innovation to prevent the entry of the potential entrant in the complementary goods market. Furthermore, our study demonstrates that the entry of the potential entrant can yield a mutually beneficial outcome for the manufacturer, the platform, and the potential entrant, creating a win–win–win scenario. In addition, our results suggest that as the production cost of innovative products rises, the manufacturer may have a stronger incentive to intensify its innovation efforts in response to the potential entrant’s exit from the market. Finally, we establish that our main results remain robust even when some of our initial assumptions are relaxed.

Dynamics of Consumption, Decision and Preferences in Branded Dairy Sector in India

The study explored the dimensions of consumption characteristics, decision aspects, and consumer predilection to determine the mechanics of the dairy industry that is experiencing a marked transformation concerning indigenous players, and new and potential entrants besides expansion in product categories. The results of the study entailed that consumers' awareness is at rock bottom regarding the presence of branded dairy marketers and they are ignorant of different categories of dairy products available in the market. The marketers must escalate the communication efforts to enter the consideration set of buyers. A thorough understanding of the target market through marketing research is pivotal to gaining acquaintance with the food habits of the market which is indispensable for devising elegant communication strategies.
 The time is ripe enough for the indigenous marketers to gear up and intensify the marketing campaign else they may be knocked out by foreign dairy companies who have already started making inroads into the Indian dairy market.

Can an E-commerce Platform and its Third-Party Sellers Benefit From Each Other’s Market Entry?

E-commerce platforms have an informational advantage over their third-party sellers, leading to the common belief that a platform's market entry would harm sellers with similar products. However, unlike traditional retail competition, the platform and its sellers have aligned incentives: the platform's commission depends on the seller's revenue, and sellers rely on the platform to strengthen their online presence. Hence, the platform has no incentive to enter the market to harm the seller's revenue severely. This paper introduces a duopoly model where the seller is the "incumbent" and the platform is the "potential entrant". Our model captures two salient features: (a) the "reputation effect" that enables the platform to obtain a higher consumer valuation than the seller, and (b) the "spillover effect" that expands the market size when an additional entity (e.g., the platform) enters the market. Our equilibrium analysis debunks the prevailing belief about platform's entry, showing that platform's entry can enable both the platform and the seller to obtain a higher profit when the unit cost is sufficiently low and the spillover effect is sufficiently high. For robustness checks, we consider three different extensions: an alternative duopoly model with reversed roles where the platform is the incumbent and the seller is the potential entrant, a scenario with an endogenously determined spillover effect, and a simultaneous market entry/exit decision-making process. We find a consistent result across all three extensions that both seller and platform entries can mutually benefit under similar market conditions, fostering a symbiotic relationship.

How to achieve both environmental protection and firm performance improvement: Based on China's carbon emissions trading (CET) policy

Based on panel data drawn from the Annual Survey of Industrial Firms (ASIF) in China spanning 1998 to 2013, this study assesses the micro-level effects of China's CET policy, reexamining the classic dilemma of balancing “environmental protection and economic growth”. The findings reveal that within the pilot industries, the CET policy leads to lower output and value-added for firms in the pilot regions. This can be attributed to the fact that firms in these regions have not notably increased their independent innovation or adopted imported digital products (technology). However, firms with higher initial productivity levels will benefit, as they engage in more independent innovation, effectively triggering the “Porter Effect”. Furthermore, the discussion highlights the heterogeneous impact of CET, and resulting performance divergence within the industry. The failure of inefficient enterprises to exit promptly and the inability of potential entrants to join in a timely manner, lead to suboptimal resource allocation, which lies at the core of the challenge in balancing environmental protection and economic growth. Additionally, the study reveals that China's CET policy significantly contributes to an increase in the value-added rate, signifying a transformation in the economic growth pattern and a natural alignment between environmental protection and economic growth.

The bright side of outside market entry with manufacturer encroachment

This study discusses the possible benefits of inviting entrants for downstream retailers when facing the encroachment of their upstream manufacturers. We consider a model comprising one retailer, one manufacturer, and one potential entrant. The manufacturer decides whether to encroach or supply the retailer; The retailer decides whether to help a third-party firm overcome its entry barrier. We show that whether firms compete in quantity or price, the manufacturer, in the presence of an entrant, may choose to supply the retailer even if the retailer does not offer any advantages in terms of cost efficiency in retailing or channel differentiation. This is because, in such a scenario, the manufacturer treats the retailer as a strategic collaborator to either restrict the entrant’s market share or alleviate the downstream competition. In other words, triggering the intra-brand competition against the retailer may help the manufacturer perform better in the inter-brand competition against the entrant. On the other hand, the retailer may intentionally prompt entry to trigger inter-brand competition to avoid being foreclosed by the manufacturer and obtain a favorable procurement condition.

Do competitive markets encourage tax aggressiveness?

We investigate whether industry-level product market competition and firm-level market leadership affect firms' tax aggressiveness. Studying competition from both current market participants and potential entrants, and using a market share-based measure of market leadership, we find that firms facing higher competition from current market participants engage in more tax aggressiveness. We further find that market-following firms — rather than market‑leading firms — engage in relatively more tax aggressiveness within these higher competition settings. Our results contrast with most political and regulatory anecdotes that target market‑leading firms for aggressive tax behaviors, and add to the ongoing policy debates on tax incidence. Our main findings and additional tests are consistent with the view that market‑leading firms in imperfectively competitive product markets are able to pass on tax costs to customers, while market-following firms in crowded industries are pressured to engage in tax aggressiveness because they cannot pass on tax costs.

Credible vs. deceptive threat of market entry: Empirical evidence from the US airline industry

Defending a competitive position in established markets when faced with new entrants is a fundamental element of competitive business-to-business dynamics. Earlier studies showcase that the market entry threats posed by potential entrants (PEs) provoke incumbents' responses to deter PEs' entry. It is worth noting, though, that not all posed market entry threats are credible and deserve an appropriate response. Accordingly, assessing the credibility of a threat is a precursor to efficiently undertaking any deterrent strategy. Drawing on signaling theory, resource-based theory, and a dynamic capability view, we develop a framework for examining the characteristics of a credible market entry threat in well-established industries. We specifically investigate how PEs' and incumbents' resources and capabilities (R&Cs) can explain the credibility of PEs' entry threats. Additionally, the moderating effect of competitive history between PEs and incumbents was examined. To test the hypotheses, we used a multi-market dataset of PE threats in the context of the U.S. airline industry from 1997 to 2016. Findings reveal that entry threats are less credible when incumbents have strong R&Cs and are more credible when PEs and incumbents have a rich history of competition in the related industries. Moreover, a rich history of competition also means that the incumbents' R&Cs lose effectiveness in undermining the credibility of the entry threat. These findings contribute to the B2B marketing strategy literature and provide managers with actionable insights for developing defensive strategies.

Learning, externalities, and export dynamics: Evidence from Chilean exporters

This paper presents a model of exporting with demand uncertainty where incumbents reveal signals about a shared component of demand that potential entrants use to update beliefs. Using Chilean export data, signals are estimated and used to examine the effects of information on entry into new markets, quantity of output sold, and duration of exporting. A one-standard-deviation-increase in signals by incumbents is associated with 6.3% higher entry rates, 11.7% larger first-year export volumes, and 0.6% longer duration. Information spillovers are larger in distant countries, in countries where Spanish is not an official language, for homogeneous products, and for larger firms.

Strategic Pricing in Volatile Markets

Dynamic Strategic Pricing Firms use pricing strategically to influence entry and exit of competitors. A key form of strategic pricing is limit pricing, whereby a market incumbent sets low prices to deter a potential entrant. In practice, strategic pricing takes place in dynamic, stochastic environments: An incumbent that uses prices to signal unprofitable entry, in reality, has to do so repeatedly and under changing market conditions. In “Strategic Pricing in Volatile Markets,” Gryglewicz and Kolb study dynamic entry deterrence through limit pricing in markets subject to persistent demand shocks. The primary insight is that when the market is subject to persistent shocks, the incentive to signal disappears in some market conditions. In equilibrium, pricing and entry decisions exhibit path dependence, depending not only on the market’s current size, but also its historical minimum. When prices are used as signals to deter entry, prices can increase for strategic reasons over an interval of time during which demand falls.

Pay‐for‐delay with settlement externalities

AbstractPay‐for‐delay patent settlements, in which the incumbent patentee pays a potential entrant to withdraw a patent challenge and stay out of the market, cost patients and taxpayers billions of dollars in higher pharmaceutical prices. We show that in markets with one incumbent and several entrants, the possibility of conditioning such settlements on litigation outcomes against other entrants results in the exclusion of all entrants from the market. When conditional contracts are infeasible, the incumbent licenses the patent or fights entry in court: the resulting competition benefiting consumers. Prohibiting all pay‐for‐delay settlements increases litigation and may harm consumers by reducing licensing.

The 5G spectrum auction in Chile

In 2021, the Chilean government implemented a first-price package auction to allocate electromagnetic spectrum for 5G mobile services. The auction was run sequentially for different spectrum bands, allowing firms to exploit band complementarities. It was a combinatorial auction, so firms could bid for any combination of blocks within a band. It contemplated spectrum caps – upper limits on the spectrum for each firm – to ensure competitiveness. The beauty contests used in previous processes became obsolete, as there was a need to promote competitiveness and transparency in the telecommunication sector. Four incumbents and one potential entrant participated in the auction. The auction raised more than USD $450 million, which was six times more than the sum of the revenues of all previous contests in the country. We discuss this experience and show how different aspects of the context justified our design choices.

The price of cost-effectiveness thresholds under therapeutic competition in pharmaceutical markets

Health systems around world are increasingly adopting cost-effectiveness (CE) analysis to inform decisions about access and reimbursement. We study how CE thresholds imposed by a health plan for granting reimbursement affect drug producers’ pricing incentives and patients’ access to new drugs. Analysing a sequential pricing game between an incumbent drug producer and a potential entrant with a new drug, we show that CE thresholds may have adverse effects for payers and patients. A stricter CE threshold may induce the incumbent to switch pricing strategy from entry accommodation to entry deterrence, limiting patients’ access to the new drug. Otherwise, irrespective of whether entry is deterred or accommodated, a stricter CE threshold is never pro-competitive and may in fact facilitate a collusive outcome with higher prices of both drugs. Compared to a laissez-faire policy, the use of CE thresholds when an incumbent monopolist is challenged by therapeutic substitutes can only increase the surplus of a health plan if it leads to entry deterrence. In this case the price reduction by the incumbent necessary to deter entry outweighs the health loss to patients who do not get access to the new drug.

Carbon allowance allocation rules under emission intensity regulation: Grandfathering versus benchmarking

This paper compares the impacts of grandfathering and benchmarking rules on firms' operating decisions, consumer surplus, and social welfare with different emission intensity limits. The findings suggest that with tight emission intensity limits, grandfathering rules are more effective in controlling carbon emissions and enhancing social welfare. Benchmarking rule with relaxed emission intensity can incentivize firms to increase output, lower product prices, and increase consumer surplus. Under relaxed intensity regulation, grandfathering rule can encourage more potential entrants to participate in the product market, and benchmarking rule can motivate firms to take more outputs, resulting higher consumer surplus and more carbon emissions.