Raising rivals' fixed costs

Olczak, Matthew (2005). Raising rivals' fixed costs. Working Paper. University of East Anglia, Norwich (UK).

Abstract

This paper analyses the strategic use of fixed costs to deter entry or monopolize a market in a standard Cournot framework. First of all a general case shows how the presence of fixed costs can affect the possible equilibria to the Cournot game. It is shown that the presence of a firm with a first-mover advantage can have important implications if fixed costs are raised. In addition the forward induction process becomes important in determining plausible equilibria. The use of firstly regulation and secondly ‘nuisance’ law-suits are considered as strategies to increase fixed costs.

Publication DOI: https://doi.org/10.2139/ssrn.891051
Divisions: Aston Business School > Economics finance & entrepreneurship
Uncontrolled Keywords: fixed cost,raising rivals’ costs,entry deterrence,monopolization,regulation,nuisance law-suits
Published Date: 2005-01
Authors: Olczak, Matthew

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