IDEAS home Printed from https://ideas.repec.org/a/kap/jincot/v13y2013i3p319-338.html
   My bibliography  Save this article

Uncovering Entry Deterrence in the Presence of Learning-by-Doing

Author

Listed:
  • Ana Espínola-Arredondo
  • Félix Muñoz-García

Abstract

This paper investigates a signaling entry deterrence model under learning-by-doing. We show that a monopolist’s practice of entry deterrence imposes smaller welfare losses (or larger welfare gains) when learning effects are present than when they are absent, making the intervention of antitrust authorities less urgent. If, however, the welfare loss associated to entry deterrence is still significant, and thus intervention is needed, our paper demonstrates that the incumbent’s practice of entry deterrence is easier to detect by a regulator who does not have access to accurate information about the incumbent’s profit function. Learning-by-doing hence facilitates the regulator’s ability to detect entry deterrence, thus suggesting its role as an “ally” of antitrust authorities. Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Ana Espínola-Arredondo & Félix Muñoz-García, 2013. "Uncovering Entry Deterrence in the Presence of Learning-by-Doing," Journal of Industry, Competition and Trade, Springer, vol. 13(3), pages 319-338, September.
    • Handle: RePEc:kap:jincot:v:13:y:2013:i:3:p:319-338
    DOI: 10.1007/s10842-012-0127-8
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10842-012-0127-8
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10842-012-0127-8?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Foster, Andrew D & Rosenzweig, Mark R, 1995. "Learning by Doing and Learning from Others: Human Capital and Technical Change in Agriculture," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1176-1209, December.
    2. Kenneth Flamm, 1993. "Semiconductor Dependency and Strategic Trade Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1 Microec), pages 249-333.
    3. Gillett, Sharon E. & Lehr, William H. & Osorio, Carlos A., 0. "Municipal electric utilities' role in telecommunications services," Telecommunications Policy, Elsevier, vol. 30(8-9), pages 464-480, September.
    4. Cabral, Luis M B & Riordan, Michael H, 1994. "The Learning Curve, Market Dominance, and Predatory Pricing," Econometrica, Econometric Society, vol. 62(5), pages 1115-1140, September.
    5. A. M. Spence, 1981. "The Learning Curve and Competition," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 49-70, Spring.
    6. Marvin B. Lieberman, 1989. "The learning curve, technology barriers to entry, and competitive survival in the chemical processing industries," Strategic Management Journal, Wiley Blackwell, vol. 10(5), pages 431-447, September.
    7. Dasgupta, Partha & Stiglitz, Joseph E, 1988. "Learning-by-Doing, Market Structure and Industrial and Trade Policies," Oxford Economic Papers, Oxford University Press, vol. 40(2), pages 246-268, June.
    8. Emmanuel Petrakis & Eric Rasmusen & Santanu Roy, 1997. "The Learning Curve in a Competitive Industry," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 248-268, Summer.
    9. Siebert Ralph B, 2010. "Learning-by-Doing and Cannibalization Effects at Multi-Vintage Firms: Evidence from the Semiconductor Industry," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-32, May.
    10. Matthews, Steven A & Mirman, Leonard J, 1983. "Equilibrium Limit Pricing: The Effects of Private Information and Stochastic Demand," Econometrica, Econometric Society, vol. 51(4), pages 981-996, July.
    11. Robert C. Seamans, 2012. "Fighting City Hall: Entry Deterrence and Technology Upgrades in Cable TV Markets," Management Science, INFORMS, vol. 58(3), pages 461-475, March.
    12. Aidan Hollis, 2002. "Strategic Implications of Learning by Doing," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 9(2), pages 157-174.
    13. repec:bla:jindec:v:45:y:1997:i:2:p:155-69 is not listed on IDEAS
    14. Luís M. B. Cabral & Michael H. Riordan, 1997. "The Learning Curve, Predation, Antitrust, and Welfare," Journal of Industrial Economics, Wiley Blackwell, vol. 45(2), pages 155-169, June.
    15. Brander, James A. & Lewis, Tracy R., 1986. "Oligopoly and Financial Structure: The Limited Liability Effect," American Economic Review, American Economic Association, vol. 76(5), pages 956-970, December.
    16. Ke Yang, 2010. "Limit-Pricing and Learning-By-Doing: A Dynamic Game with Incomplete Information," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 9(3), pages 201-212, December.
    17. Thompson, Peter, 2010. "Learning by Doing," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 1, chapter 0, pages 429-476, Elsevier.
    18. Bronwyn H. Hall & Nathan Rosenberg (ed.), 2010. "Handbook of the Economics of Innovation," Handbook of the Economics of Innovation, Elsevier, edition 1, volume 1, number 1.
    19. Irwin, Douglas A & Klenow, Peter J, 1994. "Learning-by-Doing Spillovers in the Semiconductor Industry," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1200-1227, December.
    20. Leemore S. Dafny, 2005. "Games Hospitals Play: Entry Deterrence in Hospital Procedure Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(3), pages 513-542, September.
    21. Drew Fudenberg & Jean Tirole, 1983. "Learning-by-Doing and Market Performance," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 522-530, Autumn.
    22. Bagwell, Kyle & Ramey, Garey, 1990. "Advertising and pricing to deter or accommodate entry when demand is unknown," International Journal of Industrial Organization, Elsevier, vol. 8(1), pages 93-113.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Thompson, Peter, 2010. "Learning by Doing," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 1, chapter 0, pages 429-476, Elsevier.
    2. Danial Asmat, 2021. "Collusion Along the Learning Curve: Theory and Evidence From the Semiconductor Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 69(1), pages 83-108, March.
    3. David Besanko & Ulrich Doraszelski & Yaroslav Kryukov & Mark Satterthwaite, 2008. "Learning-by-Doing, Organizational Forgetting, and Industry Dynamics," GSIA Working Papers 2009-E22, Carnegie Mellon University, Tepper School of Business.
    4. Anelí Bongers, 2017. "Learning and forgetting in the jet fighter aircraft industry," PLOS ONE, Public Library of Science, vol. 12(9), pages 1-19, September.
    5. Park, Sangin, 2009. "An empirical evaluation of the 1986 Semiconductor Trade Arrangement," Japan and the World Economy, Elsevier, vol. 21(4), pages 349-357, December.
    6. Della Seta, Marco & Gryglewicz, Sebastian & Kort, Peter M., 2012. "Optimal investment in learning-curve technologies," Journal of Economic Dynamics and Control, Elsevier, vol. 36(10), pages 1462-1476.
    7. Liu, An-Hsiang & Siebert, Ralph B., 2022. "The competitive effects of declining entry costs over time: Evidence from the static random access memory market," International Journal of Industrial Organization, Elsevier, vol. 80(C).
    8. David Besanko & Ulrich Doraszelski, 2005. "Learning-by-Doing, Organizational Forgetting, and Industry Dynanmics," Computing in Economics and Finance 2005 236, Society for Computational Economics.
    9. Apostolis Pavlou, 2015. "Learning by doing and horizontal mergers," Journal of Economics, Springer, vol. 116(1), pages 25-38, September.
    10. David Besanko & Ulrich Doraszelski & Yaroslav Kryukov & Mark Satterthwaite, 2007. "Learning-by-Doing, Organizational Forgetting, and Industry Dynamics," Levine's Bibliography 321307000000000903, UCLA Department of Economics.
    11. Malte Schwoon, 2006. "Learning-by-doing, Learning Spillovers and the Diffusion of Fuel Cell Vehicles," Working Papers FNU-112, Research unit Sustainability and Global Change, Hamburg University, revised Jun 2006.
    12. Nachtigall, Daniel & Rübbelke, Dirk, 2016. "The green paradox and learning-by-doing in the renewable energy sector," Resource and Energy Economics, Elsevier, vol. 43(C), pages 74-92.
    13. C. Lanier Benkard, 2000. "A Dynamic Analysis of the Market for Wide-Bodied Commercial Aircraft," NBER Working Papers 7710, National Bureau of Economic Research, Inc.
    14. Luca Colombo & Paola Labrecciosa, 2012. "Inter-firm knowledge diffusion, market power, and welfare," Journal of Evolutionary Economics, Springer, vol. 22(5), pages 1009-1027, November.
    15. Benkard, C. Lanier, 2000. "A Dynamic Analysis of the Market for Wide-Bodied Commercial Aircraft," Research Papers 1636, Stanford University, Graduate School of Business.
    16. Malte Schwoon, 2006. "A Tool to Optimize the Initial Distribution of Hydrogen Filling Stations," Working Papers FNU-110, Research unit Sustainability and Global Change, Hamburg University, revised Jun 2006.
    17. Unterschultz, James R. & Lerohl, Mel L. & Peng, Yanning & Gurung, Rajendra Kumar, 1998. "A Nutraceutical Industry: Policy Implications for Future Directions," Project Report Series 24051, University of Alberta, Department of Resource Economics and Environmental Sociology.
    18. Harris, Jeremiah & Siebert, Ralph, 2017. "Firm-specific time preferences and postmerger firm performance," International Journal of Industrial Organization, Elsevier, vol. 53(C), pages 32-62.
    19. Reichenbach, Johanna & Requate, Till, 2012. "Subsidies for renewable energies in the presence of learning effects and market power," Resource and Energy Economics, Elsevier, vol. 34(2), pages 236-254.
    20. Scholz, Sebastian, 2008. "Learning and Technology Adoptions," Discussion Papers in Economics 7575, University of Munich, Department of Economics.

    More about this item

    Keywords

    learning-by-doing; entry deterrence; incomplete information; spillovers; L12; D82; D83;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jincot:v:13:y:2013:i:3:p:319-338. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.