Thesis
Unobserved capacity constraints and entry deterrence
Washington State University
Master of Arts (MA), Washington State University
2011
Handle:
https://hdl.handle.net/2376/101649
Abstract
This paper examines entry deterrence and signaling when an incumbent firm experiences a capacity constraint, arising from either her productive efficiency or the high market demand she faces. In both cases, we demonstrate that separating and pooling equilibria can be sustained and that most of them survive standard equilibrium refinements. Our results show that if the financial costs that constrained and unconstrained incumbents face are substantially different, the separating equilibrium can be supported under large parameter values. In this case, information is perfectly transmitted to the entrant, and entry patterns are socially efficient. If, in contrast, both types of incumbent face similar expansion costs, we identify a policy that can help move the industry from a pooling equilibrium to the separating equilibrium with associated efficient entry: a reduction in expansion costs. Nonetheless, our results show that if this policy is overemphasized inefficient entry patterns remain unaffected, suggesting a potential disadvantage of policies that significantly reduce firms’ financial costs.
Metrics
Details
- Title
- Unobserved capacity constraints and entry deterrence
- Creators
- Gulnara Rashatovna Zaynutdinova
- Contributors
- Felix Muñoz-Garcia (Degree Supervisor)
- Awarding Institution
- Washington State University
- Academic Unit
- Economic Sciences, School of
- Theses and Dissertations
- Master of Arts (MA), Washington State University
- Publisher
- Washington State University; [Pullman, Washington] :
- Identifiers
- 99900525179101842
- Language
- English
- Resource Type
- Thesis