Raising rivals’ fixed costs


This article demonstrates that raising fixed costs can serve as a credible mechanism for a well placed firm to exclude its rivals. We identify a number of credible avenues, such as increased regulation, vexatious litigation and increased prices for essential inputs, through which such a firm can raise fixed costs. We show that for a wide range of oligopoly models this may be a profitable strategy, even if the firm’s own fixed costs are affected as much (or even more) than its rivals and even if it is less efficient. The resulting reduction in the number of firms in the market is detrimental to consumer welfare and hence worthy of scrutiny by competition and regulatory authorities.

Publication DOI: https://doi.org/10.1080/13571516.2015.1055913
Divisions: College of Business and Social Sciences > Aston Business School > Economics, Finance & Entrepreneurship
College of Business and Social Sciences > Aston Business School
Additional Information: © 2015 The Author(s). Published by Taylor & Francis. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/Licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. Funding: ESRC (RES-578-28-0002)
Uncontrolled Keywords: entry deterrence,exclusion,fixed costs,monopolisation,raising rivals’ costs,Economics and Econometrics,Business, Management and Accounting (miscellaneous)
Publication ISSN: 1466-1829
Last Modified: 05 Jan 2024 08:15
Date Deposited: 21 Oct 2015 14:05
Full Text Link: http://www.tand ... 16.2015.1055913
Related URLs: http://www.scop ... tnerID=8YFLogxK (Scopus URL)
PURE Output Type: Article
Published Date: 2016-01-01
Accepted Date: 2015-08-06
Authors: Hviid, Morten
Olczak, Matthew (ORCID Profile 0000-0001-6808-3832)



Version: Published Version

License: Creative Commons Attribution

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