Abstract
The literature on entry has become very extensive over the years.1 Although the question of entry-preventing behaviour was first raised by Kaldor,2 the main discussion arose out of the basic prediction of the model of monopolistic competition that firms would earn only normal profits in the long run, and that each firm would be operating with excess capacity (see p. 37). Harrod argued3 that firms would forgo some potential profit in the short run by setting a price lower than that which would maximise their profits in order to discourage new entrants into the industry. Subsequently, the discussion of the role of entry has largely evolved into an attempt to provide an answer to the question as to whether it is more profitable for a firm to maximise short-run profits in the knowledge that this will attract new entrants and hence erode the firm’s market share in the long run, or for a firm to deter entry by holding down prices in the short run in the expectation that it will be able to retain a substantial share of the market over time. These possibilities are illustrated in Figure 10.1.
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Notes and References
See, for example, J. S. Bain, American Economic Review (Mar 1949); J. S. Bain, Barriers to New Competition; P. Sylos-Labini, Oligopoly and Technical Progress; F. Modigliani, Journal of Political Economy (June 1958); D. E. Farrar and C. F. Phillips Jr, Journal of Political Economy (Aug 1959); D. K. Osborne, Journal of Political Economy (Aug 1964); O. E. Williamson, Quarterly Journal of Economics (Feb 1963);
H. M. Mann, Review of Economics and Statistics (Aug 1966); R. Sherman and T. D. Willett, Journal of Political Economy (Aug 1967); J. T. Wenders, Journal of Political Economy (Oct 1967); B. P. Pashigian, Journal of Industrial Economics (July 1968); D. R. Kamerschen, Journal of Political Economy (July–Aug 1968);
J. N. Bhagwati, Oxford Economic Papers (Nov 1970);
M. I. Kamien and N. L. Schwartz, Econometrica (May 1971); J. T. Wenders, Journal of Industrial Economics (Nov 1971); H. A. Cohen, Mississippi Valley Journal (winter 1971–2); R. McGuckin, Southern Economic Journal (Jan 1972);
M. Kamien and N. Schwartz, American Economic Review (Dec 1972);
W. G. Shepherd, American Economic Review, papers and proceedings (May 1973); D. K. Osborne, Journal of Industrial Economics (Sep 1973);
D. P. Baron, American Economic Review (Sep 1973); and
D. Orr, Review of Economics and Statistics (Feb 1974).
Kamien and Schwartz, Econometrica No 2. (1935)
Empirical evidence supporting this contention is also to be found in Blackstone, Quarterly Review of Economics and Business (winter 1972).
Kamien and Schwartz, Econometrica (May 1971).
Mann, Review of Economics and Statistics (Aug 1966).
See, for example, Y. Brozen, Antitrust Bulletin (spring 1969); H. M. Mann, Antitrust Bulletin (winter 1969); S. A. Rhoades, Journal of Industrial Economics (Nov 1970); and H. M. Mann, Journal of Industrial Economics (July 1971).
Orr, Review of Economics and Statistics (Feb 1974).
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© 1976 P. J. Curwen
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Curwen, P.J. (1976). The Role of Entry in Oligopoly. In: The Theory of the Firm. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-15645-0_10
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DOI: https://doi.org/10.1007/978-1-349-15645-0_10
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