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| Luigi Brighi and Marcello D'Amato |
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| ''Limit pricing and strategic investment'' |
| ( 2022, Vol. 42 No.4 ) |
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| We study an entry model where an incumbent privately informed about costs can make a cost-reducing investment choice, along with a pricing decision, in order to prevent a competing firm from entering the market.
We show that if limit pricing per se can not deter profitable entry, the opportunity to undertake a strategic investment does not provide an additional instrument for the achievement of this goal to the incumbent. |
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| Keywords: Entry deterrence, signalling, strategic investment, limit pricing, pooling equilibrium |
JEL: L1 - Market Structure, Firm Strategy, and Market Performance: General
D4 - Market Structure and Pricing: General |
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| Manuscript Received : Jun 14 2022 | | Manuscript Accepted : Dec 30 2022 |
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