Entry for Buyout

Eric Rasmusen ()

Journal of Industrial Economics, 1988, vol. 36, issue 3, 281-99

Abstract: The possibility of buying out an entrant has an import ant effect on entry deterrence. Entrants can blackmail the incumbent by threatening to keep prices low, and buyout can make entry profitab le which otherwise would not be. In particular, the entry-deterrence policy of excess capacity to reduce the postentry price can not only fail, but work against the incumbent. The presence of multiple oligop olistic incumbents or multiple potential entrants, however, can disco urage entry for buyout. Copyright 1988 by Blackwell Publishing Ltd.

Date: 1988
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