Fulfilled Expectations of Entry

Jaehong Kim

RAND Journal of Economics, 1993, vol. 24, issue 4, 681-695

Abstract: I develop a two-period model of entry deterrence with endogenous market demands such that the consumer's expectation about the future market structure is fulfilled in equilibrium. I find that both expectations (duopoly and monopoly) are fulfilled in the incumbent's price-setting game, while there is a unique equilibrium in the quantity-setting game. I also find that "quantity" is more entry-deterring than "price" in the sense that the maximum value of the entry cost that allows entry in the price-setting game is higher than or equal to that of the quantity-setting game.

Date: 1993
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