Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Monday, March 7, 2011

Strategic Advertising for Entry Deterrence Purposes

Posted by D. Daniel Sokol

Paolo Coccorese (University of Salerno - Econ) explores Strategic Advertising for Entry Deterrence Purposes.

ABSTRACT: This paper evaluates the possible effects of advertising on conditions of entry in a market with one incumbent and one potential entrant. Through a game-theoretic framework, it is shown that the use of pre-entry advertising expenditures (which are supposed to exhibit diminishing returns) may discourage entry even when firms behave rationally and face the same conditions of cost and demand.

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