Entry, Pricing, and Product Design in an Initially Monopolized Market

Steven Davis, Kevin Murphy and Robert Topel

Journal of Political Economy, 2004, vol. 112, issue S1, S188-S225

Abstract: We analyze entry, pricing, and product design in a model with differentiated products. Market equilibrium can be "separating," with multiple sellers and a sorting of heterogeneous consumers across goods, or "exclusionary," with one seller serving all customer types. Entry into an initially monopolized market can occur because of cost reductions or product improvements, but entry need not lower the incumbent's price, improve efficiency, or raise consumer welfare. Postentry design incentives favor a softening of price competition and stronger market segmentation, whereas exclusionary design changes typically raise consumer welfare. Potential, as distinct from actual, entry always benefits consumers.

Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://www.journals.uchicago.edu/cgi-bin/resolve?JPE112117PDF main text (application/pdf)
Access to the online full text or PDF requires a subscription.

Related works:
Working Paper: Entry, Pricing and Product Design in an Initially Monopolized Market (2001)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jpolec:v:112:y:2004:i:s1:p:s188-s225

Access Statistics for this article

More articles in Journal of Political Economy from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().