Janda, Karel (2009): Signaling the Strength of a Market Entrant.
Download (95kB) | Preview
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.
|Item Type:||MPRA Paper|
|Original Title:||Signaling the Strength of a Market Entrant|
|Keywords:||Signaling; Entry; Capacity|
|Subjects:||L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information; Mechanism Design
D - Microeconomics > D4 - Market Structure and Pricing > D43 - Oligopoly and Other Forms of Market Imperfection
|Depositing User:||Karel Janda|
|Date Deposited:||29. Aug 2009 13:47|
|Last Modified:||19. Feb 2013 08:24|
 Beth Allen, Raymond Deneckere, Tom Faith, and Dan Kovenock. Capacity precommitment as a barrier to entry: A Bertrand-Edgeworth approach. Economic Theory, 15(3):501–53, May 2000.
 Kyle Bagwell and Garey Ramey. Capacity, entry, and forward induction. Rand Journal of Economics, 27(4):660–680, Winter 1996.
 Jonathan Cave and Stephen W. Salant. Cartel quotas under majority rule. American Economic Review, 85(1):82–102, March 1995.
 Marc Duponcel. The poor impact of the liberalisation of EU agricultural imports from central and eastern Europe: Failure of the preferences or failure of the associated countries? Food Policy, 23(2):187–198, April 1998.
 Riccardo Faini, Jaime de Melo, and Wendy E. Takacs. A primer on MFA maze. Discussion Paper 716, CEPR, London, September 1992.
 Klaus Frohberg and Monica Hartmann. Promoting CEAs’ agricultural exports through Association Agreements with the EU; why it is not working. Discussion Paper 1, Institute of Agricultural Development in Central and Eastern Europe, Halle, Germany, 1997.
 Frederick H.Harris. Large-scale entry deterrence of a low-cost competitor: an early success of airline revenue management. International Journal of Revenue Management, 1(1):5–27, 2007.
 Kala Krishna and Ling Hui Tan. License price paths: I. Theory II. Evidence from Hong Kong. Working Paper 4237, NBER, December 1992.
 Kala Krishna and Ling Hui Tan. Transferable licences versus nontransferable licences: What is the difference. International Economic Review, 40(3):785– 800, 1999.
 Eric C. Maskin. Uncertainty and entry deterrence. Economic Theory, 14(2):429–437, August 1999.
 Steve McCorriston. Import quota licenses and market power. American Journal of Agricultural Economics, 78(2):367–372, May 1996.
 Paul Milgrom and John Roberts. Limit pricing and entry under incomplete information: An equilibrium analysis. Econometrica, 50(2):443–459, March 1982.
 Philip L. Paarlberg and John G. Lee. U.S. trade policy on lamb meat: Who gets fleeced? American Journal of Agricultural Economics, 83(1):196–208, February 2001.
 John G. Riley. Silver signals: Twenty-five years of screening and signaling. Journal of Economic Literature, 39(2):432–478, June 2001.
 Garth Saloner. Excess capacity as a policing device. Economics Letters, 18:83–86, 1985.
 Michael A. Spence. Job market signaling. Quartely Journal of Economics, 87(3):355–374, August 1973.
 Michele M. Veeman. Marketing boards: The Canadian experience revisited. American Journal of Agricultural Economics, 79(5):1554–1562, 1997.
 Kresimir Zigic. Theory of Strategic Trade Policy in North — South Trade: Optimal Northern and Southern Tariffs in an Inherently Asymmetric Environment. CERGE-EI, Prague, Czech Republic, October 2005.