Raising Rivals' Fixed Costs

Matt Olczak ()

No 05-1, Working Papers from Centre for Competition Policy, University of East Anglia

Abstract: This paper analyses the strategic use of fixed costs to deter entry or monopolize a market in a standard Cournot framework. First of all a general case shows how the presence of fixed costs can affect the possible equilibria to the Cournot game. It is shown that the presence of a firm with a first-mover advantage can have important implications if fixed costs are raised. In addition the forward induction process becomes important in determining plausible equilibria. The use of firstly regulation and secondly 'nuisance' law-suits are considered as strategies to increase fixed costs.

Keywords: Fixed costs; raising rivals' costs; entry deterrence; monopolization; regulation; nuisance law-suits (search for similar items in EconPapers)
JEL-codes: L13 L41 L51 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2005-01
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Persistent link: https://EconPapers.repec.org/RePEc:ccp:wpaper:wp05-01

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