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Entry Deterrence and Strategic Delegation

Author

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  • Wauthy, Xavier

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) ; Belgian National Fund for Scientific Research (FNRS))

Abstract

We consider a game in which firms' owners assign to their managers a delegation scheme weighting profits and market shares. Managers then compete in quantities. We show first that this delegation scheme typically leads to quantities being strategic substitutes or complements depending on firms' relative size. Second, we consider a game of entry and show that the incumbent may achieve entry deterrence using this delegation scheme. When entry is deterred, the incumbent acts as a pure monopolist.

Suggested Citation

  • Wauthy, Xavier, 1997. "Entry Deterrence and Strategic Delegation," LIDAM Discussion Papers IRES 1997031, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:1997031
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    File URL: http://sites.uclouvain.be/econ/DP/IRES/9731.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Entry deterrence; market shares; strategic delegation;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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