Capacity precommitment as a barrier to entry: A Bertrand-Edgeworth approach

DOI10.1007/S001990050309MaRDI QIDQ1571044zbMATH OpenOpenAlexFDO

Authors Beth Allen, Tom Faith, Dan Kovenock, Raymond Deneckere

Publication date 9 July 2000

Published in Economic Theory (Search for Journal in Brave)

Full work available at URL http://minneapolisfed.org/research/sr/sr187.pdf

zbMATH Keywords

Bertrand-Edgeworth modelcapacity precommitmentincumbent's capacity choice

Mathematics Subject Classification ID

Multistage and repeated games (91A20) Applications of game theory (91A80) Production theory, theory of the firm (91B38)

Review text

This paper uses the Bertrand-Edgeworth model of price competition to reexamine the role of capacity precommitment as an entry-deterring device. The authors describe the equilibria in the price-setting subgames. This information they use to construct the potential entrant's capacity best response function for different cost configurations. Next, they examine the incumbent's capacity choice and the qualitative nature of the resulting equilibria.

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• Entry deterrence, coordinating advertising and pricing in markets with consumption externalities
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• Judo economics in markets with asymmetric firms
• Capacity precommitment and price competition yield the Cournot outcome
• A price competition game under free entry
• Capacity precommitment, price competition and forward markets
• Dynamic price competition with capacity constraints and a strategic buyer
• Entry-Deterrence in Stackelberg Perfect Equilibria
• Verifying payoff security in the mixed extension of discontinuous games
• Cournot outcomes under Bertrand-Edgeworth competition with demand uncertainty
• Endogenous rationing, price dispersion and collusion in capacity constrained supergames
• Commitment and excess capacity with licensing: An old debate with a new look
• Price competition with capacity uncertainty -- feasting on leftovers
• A general model of Bertrand-Edgeworth duopoly
• Strategic pricing and entry deterrence under price-cap regulation
• Capacity precommitment, communication, and collusive pricing: theoretical benchmark and experimental evidence
• Asymmetric information on price can affect Bertrand duopoly players with the gradient-based mechanism

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