Entry Deterrence and the Free Rider Problem

Richard Gilbert and Xavier Vives

The Review of Economic Studies, 1986, vol. 53, issue 1, 71-83

Abstract: The public good aspect of entry prevention is examined in an industry characterized by an established oligopoly facing a potential entrant. Although incumbent firms act noncooperatively, underinvestment in entry-deterrence does not occur and in fact incumbents may find themselves in a Pareto dominated arrangement (in terms of profits) by preventing entry.

Date: 1986
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