Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Friday, June 7, 2013

Judo Economics in Markets with Asymmetric Firms

Posted by D. Daniel Sokol

Daniel Cracau (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg) describes Judo Economics in Markets with Asymmetric Firms.

ABSTRACT: I study a game with one market incumbent and a small entrant in a duopoly with perfectly substitutable products. Firms face a sequential Bertrand competition. Limiting the initial capacity (Judo economics) is a plausible entry strategy for the small firm. If we, however, introduce asymmetry in production cost or product quality, capacity limitation can become obsolete. I derive thresholds as regards the cost and quality differences for the entrant's choice to voluntarily limit the production capacity in equilibrium. I study a market entry game with price competition and perfectly substitutable products. Limiting the initial capacity (Judo economics) is a plausible entry strategy. I show that under asymmetry in production cost or product quality, capacity limitation can become obsolete.

http://lawprofessors.typepad.com/antitrustprof_blog/2013/06/judo-economics-in-markets-with-asymmetric-firms.html

| Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef01901bd8d227970b

Listed below are links to weblogs that reference Judo Economics in Markets with Asymmetric Firms:

Comments

Post a comment