The Effect of Exit on Entry Deterrence Strategies

Wickelgren, Abraham L.

doi:10.2139/ssrn.287050

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The Effect of Exit on Entry Deterrence Strategies

28 Pages Posted: 17 Oct 2001

See all articles by Abraham L. Wickelgren

Abraham L. Wickelgren

University of Texas at Austin - School of Law; University of Texas at Austin - Center for Law, Business, and Economics

Date Written: September 17, 2001

Abstract

Recent analyses of entry deterrence strategies have required an incumbent's post-entry output or pricing strategy to be profit maximizing. However, most papers have continued to assume that either an incumbent can commit not to exit after entry or that exit is never optimal. When there are avoidable fixed costs of operating in any period, however, exit can be the optimal strategy. In this situation, entry deterrence strategies operate very differently than when exit is never optimal. In fact, the possibility of exit can make some, previously effective, strategies completely ineffective while improving the effectiveness of others.

Keywords: Exit, Entry Deterrence

JEL Classification: L10, L12

Suggested Citation: Suggested Citation

Wickelgren, Abraham L., The Effect of Exit on Entry Deterrence Strategies (September 17, 2001). Available at SSRN: https://ssrn.com/abstract=287050 or http://dx.doi.org/10.2139/ssrn.287050