This entry places the concept of potential competition in industrial organization economics. Late twentieth-century economic analyses have brought theoretical rigour and empirical evidence for this concept. These years have also seen the emergence of alternative concepts in strategic management, and changes in the nature of competition among firms that relatively favours these alternate concepts. The importance and range of business activity that the concept of potential competition is expected to explain has thus narrowed, even as this concept has become more formal, more proven and more readily applicable.
KeywordsNetwork Externality Incumbent Firm Potential Entry Potential Competition Entry Deterrence
- Borenstein, S., and N.L. Rose. 2013. How airline markets work … or do they? Regulatory reform in the airline industry. In Economic regulation and its reform: What have we learned? ed. N.L. Rose. Chicago: University of Chicago Press.Google Scholar
- Ellison, G., and S.F. Ellison. 2011. Strategic entry deterrence and the behavior of pharmaceutical incumbents prior to patent expiration. American Economic Journal: Microeconomics 3: 1–36.Google Scholar
- Hall, R.E., J. Royer, and M. Van Audenrode. 2003. Potential competition and the prices of network goods: Desktop software. Working paper, Stanford University.Google Scholar
- Tirole, J. 1988. The theory of industrial organization. Cambridge, MA: The MIT Press.Google Scholar