Using a simple two-period model of strategic
entry deterrence, Poddar (2003) showed that Dixit's result may not always remain true if demand is not deterministic.
Therefore, the main objective of our paper is to use a structural econometric model to investigate: (1) whether codesharing between airlines in domestic air travel markets, a form of strategic alliance, has a deterrent effect on the entry of potential competitors; (2) whether there is a particular type of codesharing among alliance partners that is most effective at deterring entry; and (3) whether the market
entry deterrence impact of codesharing varies by the identity of potential market entrants.
In addition to a simple
entry deterrence strategy, a possible cause for this strategic investment behaviour may be that municipalities have a broader, i.e.
Lin, "Airline alliances and
entry deterrence," Transportation Research Part E: Logistics and Transportation Review, vol.
However, when the incumbent can use the breadth of her patent to deter market entry she maximizes expected returns by claiming the smallest patent breadth possible that could achieve
entry deterrence. In addition, the model shows that when entry cannot be deterred, while the incumbent can always use her patent breadth to induce the desired behavior by the entrant (i.e., infringement or non-infringement), claiming the maximum patent breadth possible is never an optimal strategy.
Some specific topics examined include an analysis of bidding in Ohio school milk markets, cartel stability with multiproduct firms, empirical methods in merger analysis, evidence from the US beer industry on the competitive effects of exclusive dealing, and
entry deterrence in hospital procedure markets.
But, apart from this (illicit) goal, one can distinguish between three main objectives for bundling: price discrimination, cost savings and
entry deterrence.
Section 3.1 shows how the new approach developed in Section 2.2 can be extended to a discussion of the Dixit-Spence model of
entry deterrence. Section 3.2 shows how different modes of entry can be handled within the same framework.
In this section we explore the
entry deterrence effect of investments which bear significant sunk costs and potentially raise rivals' costs.
More generally, retail banking appears to be characterized by conditions that are conducive to employing a strategy of
entry deterrence. These conditions include asymmetric information between incumbents and potential entrants, prices that can be changed quickly by incumbents in response to new entry, and the possibility of preemptive investments involving sunk costs or yielding product differentiation (as in new offices).
Competition policy, then, should focus its efforts, first and foremost, on eliminating government-created entry barriers; second, on minimizing natural barriers; and third on prohibiting anticompetitive,
entry deterrence by dominant firms.
[1982]: 'Predation, Reputation, and
Entry Deterrence, Journal of Economic Theory, 27, pp.