Advertising and Entry Barriers Revisited

John Cubbin

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: In a paper in the Southern Economic Journal, 1974, R. Schmalansee has claimed to demonstrate that "even though established firms have built up loyalty to their brands or sell to inert customers, this does not give them any advantage to deter entry. Only if capital markets are serious imperfect and potential entrants lack valuable assets to use as collateral might the market position of the established firms hinder entry". This proposition was cited by Needham and repeated by Cchmalansee, in articles appearing in the journal of Industrial Economics, September, 1976. A fortiori, one might be led to suppose that in the absence of lagged effects advertising is quite powerless to create entry barriers.

Pages: 16 pages
Date: 1979
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