Entry Deterrence in the Commons with Multiple Incumbents

Ana Espinola-Arredondo and Felix Munoz-Garcia

No 2012-1, Working Papers from School of Economic Sciences, Washington State University

Abstract: We examine an entry-deterrence model with multiple incumbents who strategically increase their individual appropriation in order to prevent entry. We find that, as the number of incumbents increases entry deterence can only be supported if the resource is abundant. Additionally, we show that entry deterrence yields a welfare improvement, relative to contexts of unthreatened entry, if few firms exploit a moderately abundant resource. When several firms compete, however, welfare losses can arise. Consequently, the presence of several incumbents recommends the implementation of policies that hinder entry under larger conditions than when a single incumbent exploits the commons.

Keywords: Entry Deterrence; Multiple Incumbents; Common Pool Resources (search for similar items in EconPapers)
JEL-codes: D62 L12 Q20 (search for similar items in EconPapers)
Pages: 27 pages
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