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Entry Deterrence and Strategic Delegation

Xavier Wauthy

No 1997031, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: We consider a game in which firms' owners assign to their managers a delegation scheme weighting profits and market shares. Managers then compete in quantities. We show first that this delegation scheme typically leads to quantities being strategic substitutes or complements depending on firms' relative size. Second, we consider a game of entry and show that the incumbent may achieve entry deterrence using this delegation scheme. When entry is deterred, the incumbent acts as a pure monopolist.

Keywords: Entry deterrence; market shares; strategic delegation (search for similar items in EconPapers)
JEL-codes: L13 L22 (search for similar items in EconPapers)
Pages: 8
Date: 1997-11-01
New Economics Papers: this item is included in nep-ent and nep-mic
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