Contes tability theory suggests that threat of entry may prevent monopolistic pricing e ven in a concentrated market because, if exit from the market is easy, monopolis tic pricing would induce hit and run entry. This paper shows that, despite easy exit, hit and run entry is unprofitable if...

This paper analyzes, in a simple duopoly model, the welfare effects of investments that reduce marginal cost and, thus, lead the investing firm to expand output and the rival to contract or exit altogether. It shows why welfare can decrease even if price falls and even if the investment is...