Entry Deterrence and Entry Accommodation Strategies of a Multiproduct Firm Regulated with Dynamic Price Cap

Paula Sarmento () and António Brandão ()

International Advances in Economic Research, 2007, vol. 13, issue 1, pages 19-34

Abstract: In this paper we study the way a multiproduct firm, regulated through a dynamic price cap, can develop a price strategy that uses the regulatory policy to deter entry. We consider a firm that initially operates as a monopolist in two markets but faces potential entry in one of the markets. We conclude that the regulated firm can have the incentive to block the entry. This strategy leads to the reduction of the price in both markets. However, the final effect of the entry deterrence strategy on total consumer surplus is not always positive. Copyright International Atlantic Economic Society 2007

Keywords: price cap regulation; entry; L11; L51 (search for similar items in EconPapers)

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