International Advances in Economic Research

, Volume 13, Issue 1, pp 19–34 | Cite as

Entry Deterrence and Entry Accommodation Strategies of a Multiproduct Firm Regulated with Dynamic Price Cap

Article

Abstract

In this paper we study the way a multiproduct firm, regulated through a dynamic price cap, can develop a price strategy that uses the regulatory policy to deter entry. We consider a firm that initially operates as a monopolist in two markets but faces potential entry in one of the markets. We conclude that the regulated firm can have the incentive to block the entry. This strategy leads to the reduction of the price in both markets. However, the final effect of the entry deterrence strategy on total consumer surplus is not always positive.

Keywords

price cap regulation entry 

JEL Classification

L11 L51 

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Copyright information

© International Atlantic Economic Society 2006

Authors and Affiliations

  1. 1.Faculty of EconomicsUniversity of PortoPortoPortugal

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