Don't Forget to Protect Abundant Resources

Ana Espinola-Arredondo and Felix Munoz-Garcia

Strategic Behavior and the Environment, 2013, vol. 3, issue 4, 251-278

Abstract: We examine an entry-deterrence model with multiple incumbents who strategically increase their individual appropriation in order to prevent entry. We show that entry deterrence yields a welfare improvement, relative to contexts of unthreatened entry, if firms exploit a relatively scarce resource. When incumbents compete for an abundant commons, however, their exploitation becomes large, and welfare losses can arise. Hence, our paper suggests that policies that protect the commons from further entry are actually more necessary when the resource is abundant than when it is scarce.

Keywords: Entry Deterrence; Multiple incumbents; Common pool resources (search for similar items in EconPapers)
JEL-codes: D62 L12 Q20 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:now:jnlsbe:102.00000032

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