Advertising and entry deterrence: how the size of the market matters

Bennour, Khaled (2006): Advertising and entry deterrence: how the size of the market matters. Published in: International Journal of Business and Economics , Vol. 6, No. 3 (December 2007): pp. 199-206.

Abstract

Schmalensee (1974) shows that, when the cost functions of the advertising e¤ort are linear, the monopoly position is only sustained when the advertising�s e¤ectiveness of the incumbent is relatively high. We show that this result does not hold in a more general nonlinear cost. The no-entry equilibrium may hold even when the relative e¤ectiveness of the incumbent is low. This happens when the size of the market is su¢ ciently low.

• Item Type: MPRA Paper
• Language: English
• Keywords: Advertising, Entry, Market seize
• Subjects: D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection

References

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[4] Schmalensee, R., 1976. A model of Promotional competition in Oligopoly , The Review of Economic Studies 43, 493-507.

[5] Scott Morton, F., 2000. Barriers to Entry, Brand Advertising, and Generic Entry in the U. S. Pharmaceutical Industry, International Journal of Industrial Organization 18, 1085-1104.