Noncooperative Entry Deterrence, Uncertainty, and the Free Rider Problem

Michael Waldman

The Review of Economic Studies, 1987, vol. 54, issue 2, 301-310

Abstract: Previous authors who have considered the issue of noncooperative entry deterrence have not found the free rider problem to be a significant factor. These authors, however, have only considered models in which the exact investment needed to deter entry is known with certainty. In this paper I add uncertainty to the models investigated by these previous authors, and demonstrate that the free rider problem can be significant, but is not so in all cases. That is, for certain types of entry deterring investments the introduction of uncertainty causes the oligopoly to underinvest in entry deterrence; however, for other types no underinvestment result arises.

Date: 1987
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Working Paper: Noncooperative Entry Deterrence, Uncertainty, and the Free Rider Problem (1985)
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