Strategic Investment and Market Integration



Proposition 5 If D and S are satisfied in the third version of the two-market game, Γ3t, then the
incumbent installs capacity nx
< feɜ x + (n 1) χm to deter entry.

Proof. Appendix B ■

In the previous sections, the difficulties of entry deterrence in the first, second and third versions
of the multi-market game have been characterized. It takes more capacity than
п times the
deterrence level
x to deter entry of many potential competitors in a sequential or simultaneous
market structure. More speci
fically, the established firm installs exactly the same capacity to deter
entry in Γ
^, Γ2l and rɜ. Thus, the unique optimal deterring capacity is independent of the market
situation, as described in the
first, second and third versions of the multi-market game.

Proposition 6 If conditions D and S are satisfied, the global capacity required to deter entry in
the п-market game is independent of the timing of the game, i.e. sequential or simultaneous entry
of potential competitors, and the size of the potential entrant.

Proof. Appendix C. ■

This proposition is interesting for two reasons. First, it might be difficult for the incumbent to
obtain information about potential entrants
ex ante, but our results suggest that such information
might not be necessary. The result implies that an incumbent does not need information about
the timing and the number of potential entrants to determine its entry-deterring strategy. The
results of the model apply to several di
fferent situations, for example both to a situation with one
large competitor and to a situation with competition from a series of local competitors.

Not surprisingly, it also follows that the difference between the single-market game and the
multi-market game increases with the number of markets in the multi-market game.

If condition D holds with equality, the entry-deterring capacity per market in an п-market
game increases in the number of markets and converges to
χm, as п goes to infinity.

The intuition for this result is that unilateral entry in a single market is harder to deter as
partial exit to the remaining п
1 markets becomes increasingly attractive. As the number of
monopoly-markets increases, the alternative to
fight entry in a single market looks less and less
attractive, in comparison to using the capacity in the remaining monopoly markets. It should,

14



More intriguing information

1. The name is absent
2. Short Term Memory May Be the Depletion of the Readily Releasable Pool of Presynaptic Neurotransmitter Vesicles
3. The InnoRegio-program: a new way to promote regional innovation networks - empirical results of the complementary research -
4. Investment and Interest Rate Policy in the Open Economy
5. A Principal Components Approach to Cross-Section Dependence in Panels
6. The name is absent
7. Institutions, Social Norms, and Bargaining Power: An Analysis of Individual Leisure Time in Couple Households
8. THE ECONOMICS OF COMPETITION IN HEALTH INSURANCE- THE IRISH CASE STUDY.
9. Transport system as an element of sustainable economic growth in the tourist region
10. Tobacco and Alcohol: Complements or Substitutes? - A Statistical Guinea Pig Approach
11. The name is absent
12. Does Presenting Patients’ BMI Increase Documentation of Obesity?
13. Globalization, Redistribution, and the Composition of Public Education Expenditures
14. Reform of the EU Sugar Regime: Impacts on Sugar Production in Ireland
15. The Values and Character Dispositions of 14-16 Year Olds in the Hodge Hill Constituency
16. The name is absent
17. LOCAL PROGRAMS AND ACTIVITIES TO HELP FARM PEOPLE ADJUST
18. Innovation Trajectories in Honduras’ Coffee Value Chain. Public and Private Influence on the Use of New Knowledge and Technology among Coffee Growers
19. Co-ordinating European sectoral policies against the background of European Spatial Development
20. Human Rights Violations by the Executive: Complicity of the Judiciary in Cameroon?