Journal of Industry, Competition and Trade

, Volume 13, Issue 3, pp 319–338 | Cite as

Uncovering Entry Deterrence in the Presence of Learning-by-Doing

Article

Abstract

This paper investigates a signaling entry deterrence model under learning-by-doing. We show that a monopolist’s practice of entry deterrence imposes smaller welfare losses (or larger welfare gains) when learning effects are present than when they are absent, making the intervention of antitrust authorities less urgent. If, however, the welfare loss associated to entry deterrence is still significant, and thus intervention is needed, our paper demonstrates that the incumbent’s practice of entry deterrence is easier to detect by a regulator who does not have access to accurate information about the incumbent’s profit function. Learning-by-doing hence facilitates the regulator’s ability to detect entry deterrence, thus suggesting its role as an “ally” of antitrust authorities.

Keywords

learning-by-doing entry deterrence incomplete information spillovers 

JEL Classification

L12 D82 D83 

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Copyright information

© Springer Science+Business Media New York 2012

Authors and Affiliations

  • Ana Espínola-Arredondo
    • 1
  • Félix Muñoz-García
    • 2
  1. 1.School of Economic SciencesWashington State UniversityPullmanUSA
  2. 2.School of Economic SciencesWashington State UniversityPullmanUSA

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