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Joint ventures for entry deterrence

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  • Shaoping Zhao

    (The Richard Stockton College of New Jersey, Pomona, NJ, USA)

Abstract

The literature of joint ventures has not discussed whether joint ventures may be used to deter entry. This paper then addresses how joint ventures may be used strategically for this purpose. Under the assumptions of linear demand and linear cost, as well as Stackelberg-Cournot interactions between incumbents and their joint venture firms, it is found that the incumbents can deter entry by creating independent joint ventures. Furthermore, it is shown that the optimal number of the joint ventures for the deterrence and the optimal deterrence strategies are functions of the number of potential entrants. Copyright © 1999 John Wiley & Sons, Ltd.

Suggested Citation

  • Shaoping Zhao, 1999. "Joint ventures for entry deterrence," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 20(1), pages 25-35.
    • Handle: RePEc:wly:mgtdec:v:20:y:1999:i:1:p:25-35
    DOI: 10.1002/(SICI)1099-1468(199902)20:1<25::AID-MDE915>3.0.CO;2-4
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    References listed on IDEAS

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    1. Marius Schwartz & Earl A. Thompson, 1986. "Divisionalization and Entry Deterrence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(2), pages 307-321.
    2. A. Michael Spence, 1979. "Investment Strategy and Growth in a New Market," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 1-19, Spring.
    3. Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring.
    4. Nyberg, Sten, 1995. "Reciprocal shareholding and takeover deterrence," International Journal of Industrial Organization, Elsevier, vol. 13(3), pages 355-372, September.
    5. Baye, Michael R & Crocker, Keith J & Ju, Jiandong, 1996. "Divisionalization, Franchising, and Divestiture Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 86(1), pages 223-236, March.
    6. Shabtai Donnenfeld & Shlomo Weber, 1995. "Limit Qualities and Entry Deterrence," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 113-130, Spring.
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    Cited by:

    1. Jost, Peter-J., 2011. "Joint ventures in patent contests with spillovers and the role of strategic budgeting," Journal of Economics and Business, Elsevier, vol. 63(6), pages 605-637.
    2. Domenico Buccella & Luciano Fanti, 2024. "A theory of entry dissuasion," Bulletin of Economic Research, Wiley Blackwell, vol. 76(3), pages 666-684, July.

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