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Entry encouragement

Author: Neven, Damien J. ; Corstjens, Marcel ; Matutes, CarmenINSEAD Area: Economics and Political ScienceIn: Marketing Letters, vol. 1, no. 3, 1990 Language: EnglishDescription: p. 221-228.Type of document: INSEAD ArticleNote: Please ask the Library for this articleAbstract: In this paper, the possibility that a dominant firm will encourage rather than deter entry of a potential competitor is investigated. It is found that entry can be encouraged by a dominant firm in order to induce a new entrant to resolve the demand uncertainty in a new market. A specific incentive mechanism that the incumbent can use to encourage entry and find plausible circumstances under wich entry encouragement is a dominant competitive strategy, is proposed
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In this paper, the possibility that a dominant firm will encourage rather than deter entry of a potential competitor is investigated. It is found that entry can be encouraged by a dominant firm in order to induce a new entrant to resolve the demand uncertainty in a new market. A specific incentive mechanism that the incumbent can use to encourage entry and find plausible circumstances under wich entry encouragement is a dominant competitive strategy, is proposed

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