A Model of Duopoly Suggesting a Theory of Entry Barriers
This paper analyzes a model of duopoly with fixed costs. Leadership by one "established" firm may yield an outcome in which the second is inactive, but entry prevention is not a prior constraint. We find that two aspects of product differentiation have distinct effects: an absolute advantage in demand for the established firm makes entry harder, but a lower cross-price effect facilitates it. In the basic model we maintain the same quantity after entry. An extension of the model deals with the case where the threat of a predatory output increase after entry is made credible by carrying excess capacity prior to entry.
Year of publication: |
1979
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Authors: | Dixit, Avinash |
Published in: |
Bell Journal of Economics. - The RAND Corporation, ISSN 0361-915X. - Vol. 10.1979, 1, p. 20-32
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Publisher: |
The RAND Corporation |
Saved in:
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