Korean Management Science Review (경영과학)

The Korean Operations Research and Management Science Society (한국경영과학회)
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Entry Deterrence and Price Competition under Asymmetric Information

비대칭적 정보 하에서 진입 억제와 가격 경쟁

  • Received : 2016.09.09
  • Accepted : 2016.12.14
  • Published : 2016.12.31
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Abstract

We study limit pricing in a price-based duopoly market under asymmetric information on the demand state. An incumbent, who is a monopolist in the initial period, has complete information on the size of a market, while a potential entrant only knows it partially. After observing the sales price of the incumbent in the first period, the entrant decides whether to enter a duopoly market and the sales price if she chooses to. We present a separating perfect Bayesian equilibrium, which indicates that limit pricing can deter the entry of a potential entrant under price competition when there is information asymmetry about the demand state.

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