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Entry Decision and Pricing Policies

Sílvia Jorge and Cesaltina Pires ()

No 41, Working Papers de Economia (Economics Working Papers) from Departamento de Economia, Gestão e Engenharia Industrial, Universidade de Aveiro

Abstract: We extend the analysis of the impact of firms' pricing policies upon entry to a framework where price competition and differentiated products are present. We consider a model where an incumbent serves two distinct and independent geographical markets and an entrant may enter in one of the markets. Entry under discriminatory pricing is more likely than under uniform pricing when entry is profitable under discriminatory pricing but unprofitable under uniform pricing. Our results show entry under discriminatory pricing may be more, less or equally likely than under uniform pricing. We show that the degree of product substitutability affects the impact of pricing policies upon entry decision.

Keywords: Entry; Product Differentiation; Discriminatory Pricing; Uniform Pricing (search for similar items in EconPapers)
JEL-codes: D40 L11 L13 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2007-02
New Economics Papers: this item is included in nep-com, nep-ind and nep-mic
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