Strategic Advertising for Entry Deterrence Purposes

Paolo Coccorese

CELPE Discussion Papers from CELPE - CEnter for Labor and Political Economics, University of Salerno, Italy

Abstract: This paper evaluates the possible effects of advertising on conditions of entry in a market with one incumbent and one potential entrant. Through a game-theoretic framework, it is shown that the use of pre-entry advertising expenditures (which are supposed to exhibit diminishing returns) may discourage entry even when firms behave rationally and face the same conditions of cost and demand.

Keywords: market structure; advertising (search for similar items in EconPapers)
JEL-codes: L1 (search for similar items in EconPapers)
Date: 2001-03
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Persistent link: https://EconPapers.repec.org/RePEc:sal:celpdp:61

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