Entry Deterrence in Durable-Goods Monopoly∗
نویسندگان
چکیده
There are industries that tend to remain monopolized, with successive generations of a good being introduced by an incumbent monopolist. This paper investigates the tendency of persistent leadership in durable goods industry. In particular it explores the implications of the durability of a good on the pricing and innovation behavior of both the incumbent monopolist and a potential entrant. It is shown that the durability of the good either acts as an entry barrier itself or creates an opportunity for the incumbent firm to deter entry by limit pricing. Moreover, we demonstrate that entry deterrence by limit pricing may cause underinvestment in innovation.
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