IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/17007.html
   My bibliography  Save this paper

Signaling the Strength of a Market Entrant

Author

Listed:
  • Janda, Karel

Abstract

This article belongs to the game theoretic and information economics literature dealing with the problem of signaling in the context of game theoretical models of entry into the industry. As opposed to the majority of literature we consider the situation of asymmetric information where the private information belongs to the entrant. We model the capacity decision of the entrant as a signal of his strength. We show that in the Stackelberg model of market entry for some values of underlying parameters the entrant fully utilizes his capacity while for other parameter values he builds excess capacity. The model may be empirically relevant for industrial organization analysis of the entry of a new supplier to the existing supply chain.

Suggested Citation

  • Janda, Karel, 2009. "Signaling the Strength of a Market Entrant," MPRA Paper 17007, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:17007
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/17007/1/MPRA_paper_17007.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Milgrom, Paul & Roberts, John, 1982. "Limit Pricing and Entry under Incomplete Information: An Equilibrium Analysis," Econometrica, Econometric Society, vol. 50(2), pages 443-459, March.
    2. Jonathan Cave & Stephen W. Salant, 1996. "Cartel Quotas under Majority Rule," Contributions to Economic Analysis, in: Agricultural Markets, pages 273-309, Emerald Group Publishing Limited.
    3. Michele M. Veeman, 1997. "Marketing Boards: The Canadian Experience Revisited," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 45(4), pages 411-420, December.
    4. Michele M. Veeman, 1997. "Marketing Boards: The Canadian Experience Revisited," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(5), pages 1554-1562.
    5. John G. Riley, 2001. "Silver Signals: Twenty-Five Years of Screening and Signaling," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 432-478, June.
    6. Dan Kovenock & Raymond Deneckere & Tom Faith & Beth Allen, 2000. "Capacity precommitment as a barrier to entry: A Bertrand-Edgeworth approach," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 15(3), pages 501-530.
    7. repec:fth:geneec:93.07 is not listed on IDEAS
    8. Riccardo Faini & Jaime Melo & Wendy Takacs, 1995. "A Primer on the MFA Maze," The World Economy, Wiley Blackwell, vol. 18(1), pages 113-135, January.
    9. Kala Krishna & Ling Hui Tan, 1992. "License Price Paths: I. Theory II. Evidence from Hong Kong," NBER Working Papers 4237, National Bureau of Economic Research, Inc.
    10. Kresimir Zigic, 2005. "Theory of Strategic Trade Policy in North–South Trade: Optimal Northern and Southern Tariffs in an Inherently Asymmetric Environment," CERGE-EI Books, The Center for Economic Research and Graduate Education - Economics Institute, Prague, edition 1, number b04, May.
    11. Krishna, Kala & Tan, Ling Hui, 1999. "Transferable Licenses versus Nontransferable Licenses: What Is the Difference?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 785-800, August.
    12. Steve McCorriston, 1996. "Import Quota Licenses and Market Power," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 367-372.
    13. Saloner, Garth, 1985. "Excess capacity as a policing device," Economics Letters, Elsevier, vol. 18(1), pages 83-86.
    14. Philip L. Paarlberg & John G. Lee, 2001. "U.S. Trade Policy on Lamb Meat: Who Gets Fleeced?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(1), pages 196-208.
    15. Frohberg, Klaus & Hartmann, Monika, 1997. "Promoting CEA agricultural exports through association agreements with the EU: why it is not working," IAMO Discussion Papers 1, Leibniz Institute of Agricultural Development in Transition Economies (IAMO).
    16. Eric S. Maskin, 1999. "Uncertainty and entry deterrence," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 14(2), pages 429-437.
    17. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(3), pages 355-374.
    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. Meng, Dawen & Tian, Guoqiang, 2013. "Entry-Deterring Nonlinear Pricing with Bounded Rationality," MPRA Paper 57935, University Library of Munich, Germany, revised May 2014.
    2. Starkov, Egor, 2023. "Only time will tell: Credible dynamic signaling," Journal of Mathematical Economics, Elsevier, vol. 109(C).
    3. Kaya, Ayça, 2009. "Repeated signaling games," Games and Economic Behavior, Elsevier, vol. 66(2), pages 841-854, July.
    4. Josse Delfgaauw & Robert Dur, 2008. "Incentives and Workers' Motivation in the Public Sector," Economic Journal, Royal Economic Society, vol. 118(525), pages 171-191, January.
    5. Kampelmann, Stephan & Rycx, François, 2012. "The impact of educational mismatch on firm productivity: Evidence from linked panel data," Economics of Education Review, Elsevier, vol. 31(6), pages 918-931.
    6. Vaccari, Federico, 2023. "Competition in costly talk," Journal of Economic Theory, Elsevier, vol. 213(C).
    7. Jascha-Alexander Koch & Michael Siering, 2019. "The recipe of successful crowdfunding campaigns," Electronic Markets, Springer;IIM University of St. Gallen, vol. 29(4), pages 661-679, December.
    8. Alessandro Tampieri, 2016. "Social background effects on school and job opportunities," Education Economics, Taylor & Francis Journals, vol. 24(5), pages 496-510, September.
    9. Dominiak, Adam & Lee, Dongwoo, 2023. "Testing rational hypotheses in signaling games," European Economic Review, Elsevier, vol. 160(C).
    10. Ursprung, Heinrich, 2019. "Endogenous maternity allowances as exemplified by academic promotion standards," Labour Economics, Elsevier, vol. 60(C), pages 1-11.
    11. Brennan A. McLachlan & G. Cornelis van Kooten, 2022. "Reforming Canada's dairy supply management scheme and the consequences for international trade," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 70(1), pages 21-39, March.
    12. Mehmet Ekmekci & Nenad Kos, 2020. "Signaling Covertly Acquired Information," Working Papers 658, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    13. Munoz-Garcia Felix & Espinola-Arredondo Ana, 2011. "The Intuitive and Divinity Criterion: Interpretation and Step-by-Step Examples," Journal of Industrial Organization Education, De Gruyter, vol. 5(1), pages 1-20, March.
    14. Jed DeVaro & Michael Waldman, 2012. "The Signaling Role of Promotions: Further Theory and Empirical Evidence," Journal of Labor Economics, University of Chicago Press, vol. 30(1), pages 91-147.
    15. David S. Patel, 2012. "Concealing to reveal: The informational role of Islamic dress," Rationality and Society, , vol. 24(3), pages 295-323, August.
    16. Figueroa, Nicolás & Guadalupi, Carla, 2021. "Testing the sender: When signaling is not enough," Journal of Economic Theory, Elsevier, vol. 197(C).
    17. Baranchuk, Nina & Dybvig, Philip H., 2015. "Screening of possibly incompetent agents," Economics Letters, Elsevier, vol. 135(C), pages 15-18.
    18. Eliasson, Kent, 2006. "The Role of Ability in Estimating the Returns to College Choice: New Swedish Evidence," Umeå Economic Studies 691, Umeå University, Department of Economics.
    19. Tarkom, Augustine & Yang, Lukai, 2024. "Presidential economic approval rating and trade credit," International Review of Financial Analysis, Elsevier, vol. 93(C).
    20. Truyts, Tom, 2012. "Signaling and indirect taxation," Journal of Public Economics, Elsevier, vol. 96(3), pages 331-340.

    More about this item

    Keywords

    Signaling; Entry; Capacity;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:pra:mprapa:17007. 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: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    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.