This paper studies R&D investment decisions of a firm facing the threat of new technology entry and subject to technical uncertainty. We distinguish four scenarios: inevitable entry, entry deterrence, entry blockade, and non-credible entry threat. The entry threat stimulates the incumbent to...

Past empirical literature provides strong evidence that competition increases when new firms enter a market. However, rarely have economists been able to examine how competition changes with the threat of entry. This paper uses the evolution of the zip code level market structure of...

The paper is an extension of the contributions provided by Aghion and Bolton (1987), Chung (1994, 1996), and Spier and Whinston (1995)--among others--to the analysis of the trade-off between the enforcement of incomplete contracts characterised by specific investments and the market foreclosure...

We develop a simple model of competition for the market that shows that, contrary to the Arrow view, endogenous entry threat in a market induces the average firm to invest less in R&D and the incumbent leader to invest more. We test these predictions with a Tobit model based on a unique dataset...

Some theories predict that firms with higher financial leverage compete more aggressively in product markets than firms with lower financial leverage, whereas others predict that lower-leverage firms compete more aggressively than higher-leverage firms. This paper studies how incumbent airlines'...