Marketing Letters

, Volume 1, Issue 3, pp 221–228 | Cite as

Entry encouragement

  • M. Corstjens
  • C. Matutes
  • D. Neven
Article
  • 27 Downloads

Abstract

In this paper, we investigate the possibility that a dominant firm will encourage rather than deter entry of a potential competitor. We find that entry can be encouraged by a dominant firm in order to induce a new entrant to resolve the demand uncertainty in a new market. We propose a specific incentive mechanism that the incumbent can use to encourage entry and find plausible circumstances under which entry encouragement is a dominant competitive strategy.

Key words

Entry Demand Uncertainty Incentives Competitive Strategy 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Abegglen, J., and G. Stalk. (1975).Kaisha, the Japanese Corporation. Harper and Row.Google Scholar
  2. Dixit, A. (1980). “The Role of Investment in Entry Deterrence,”Economic Journal 90, 95–106.Google Scholar
  3. Fudenberg, D., and J., Tirole. (1984). “The Fat-Cat Effect, The Puppy-Dog Ploy, and The Lean and Hungry Look,”American Economic Review, Papers and Proceedings 74, 361–366.Google Scholar
  4. Grossman, S., and O., Hart. (1980). “Takeover Bids, the Free-Rider Problem, and the Theory of the Corporation,”The Bell Journal of Economics 11 (1), 42–64.Google Scholar
  5. Schmalensee, R. (1978). “Entry Deterrence in the Ready-to-Eat Breakfast Cereal Industry,”Bell Journal of Economics 9, 305–327.Google Scholar
  6. Shavell, S. (1979). “Risk Sharing and Incentives in the Principal and Agent Relationship,”Bell Journal of Economics 10 (1), 55–73.Google Scholar
  7. Spence, M. (1980). “Notes on Advertising. Economies of Scale and Entry Barriers,”The Quarterly Journal of Economics, 493–507.Google Scholar

Copyright information

© Kluwer Academic Publishers 1990

Authors and Affiliations

  • M. Corstjens
  • C. Matutes
  • D. Neven

There are no affiliations available

Personalised recommendations