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Entry Deterrence and Entry Accommodation Strategies of a Multiproduct Firm Regulated with Dynamic Price Cap

Author

Listed:
  • Paula Sarmento

    (CETE, Faculdade de Economia, Universidade do Porto)

  • António Brandão

    (CETE, Faculdade de Economia, Universidade do Porto)

Abstract

In this paper we study the way a multiproduct firm, regulated through a dynamic price cap, can develop a price strategy that uses the regulatory policy to deter entry. We consider a firm that initially operates as a monopolist in two markets but faces potential entry in one of the markets. We conclude that the regulated firm can have the incentive to block the entry. This strategy leads to the reduction of the price in both markets. However, the final effect of the entry deterrence strategy on total consumer surplus is not always positive.

Suggested Citation

  • Paula Sarmento & António Brandão, 2005. "Entry Deterrence and Entry Accommodation Strategies of a Multiproduct Firm Regulated with Dynamic Price Cap," CEF.UP Working Papers 0502, Universidade do Porto, Faculdade de Economia do Porto.
    • Handle: RePEc:por:cetedp:0502
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    References listed on IDEAS

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    1. Armstrong, Mark & Vickers, John, 1993. "Price Discrimination, Competition and Regulation," Journal of Industrial Economics, Wiley Blackwell, vol. 41(4), pages 335-359, December.
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    Cited by:

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    More about this item

    Keywords

    price cap regulation; entry;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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