Product Diversification, Entry Prevention and Limit Pricing

Takashi Omori and George Yarrow

Bell Journal of Economics, 1982, vol. 13, issue 1, 242-248

Abstract: This article considers a multiproduct market in which an established firm faces an unlimited number of potential competitors, and all firms have identical cost functions exhibiting scale economies. It is shown that, if von Stackelberg leadership is feasible, the established firm's profit-maximizing strategy will always involve entry deterrence. The characteristics of alternative entry deterring policies are outlined. For a two-good model, it is argued that product diversification is a feature of optimal strategies when substitutability in demand between the goods is relatively low. This will (will not) be coupled with limit pricing when fixed costs are low (high).

Date: 1982
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://links.jstor.org/sici?sici=0361-915X%2819822 ... O%3B2-9&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rje:bellje:v:13:y:1982:i:spring:p:242-248

Ordering information: This journal article can be ordered from
https://editorialexp ... i-bin/rje_online.cgi

Access Statistics for this article

More articles in Bell Journal of Economics from The RAND Corporation
Bibliographic data for series maintained by ().