Firm Entry Deterrence Behaviour in the Cement Industry in Cambodia
Kanthasat Boontem and
Anselm Komla Abotsi
International Journal of Asian Social Science, 2016, vol. 6, issue 5, 314-326
Abstract:
The study empirically analyzes whether the existing firm in the cement industry in Cambodia exhibits entry deterrence behaviour and also whether this threat is credible. Basic game theory and pure strategy Nash equilibrium were deployed in analyzing the behaviour of both firms. The framework in this study considered the payoff between two firms which act in different ways. The new firm is considered as ‘entrant’ and the other firm already established in Cambodia as ‘incumbent’. The study modeled the cost function to consist of fixed setup cost, constant cost per unit of capacity and constant average variable cost in estimating the total cost of production. The price of cement was estimated using the inverse demand function. The total revenue is estimated as the product of the price and the total supply of cement on the market. The payoff is the revenue less the total cost of production of each firm. The unique Nash equilibrium of the game, is, "No new investment, No new investment" in both the short and long run by both firms. The study concludes that the threat of the incumbent in the cement market in Cambodia to deter the entrant is not credible.
Keywords: Firm deterrent behaviour; Foreign direct investment; Cement industry; Nash equilibrium; Game theory. (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations:
Downloads: (external link)
https://archive.aessweb.com/index.php/5007/article/view/2813/4246 (application/pdf)
Related works:
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:asi:ijoass:v:6:y:2016:i:5:p:314-326:id:2813
Access Statistics for this article
More articles in International Journal of Asian Social Science from Asian Economic and Social Society
Bibliographic data for series maintained by Robert Allen ().