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 …