Anticipated Entry and Entry Deterrence: Evidence from the American Casino Industry

J. Anthony Cookson ()
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J. Anthony Cookson: Leeds School of Business, University of Colorado at Boulder, Boulder, Colorado 80309

Management Science, 2018, vol. 64, issue 5, 2325-2344

Abstract: Using new data on entry plans into the American casino industry, I find that incumbent firms invest in physical capacity when threatened with a nearby entry plan, and these strategic investments deter eventual entry. Consistent with an entry-deterrence motive, incumbents respond to the threat of entry when entry is uncertain, but not when entry is assured. The average capacity expansion of 2,300 square feet is associated with a 6.8-percentage-point greater likelihood that the entry plan fails. These findings show that investments in deterrence are viable, especially when new entrants face other significant barriers to entry.

Keywords: firm objectives; organization and behavior; market structure; firm strategy; market performance; industries; leisure; strategy (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (18)

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