CAPACITY COMPETITION IN DIFFERENTIATED OLIGOPOLIES: ENTRY DETERRENCE WITH ALTERNATIVE OBJECTIVE FUNCTIONS

Main Article Content

Bojan Ristić Dejan Trifunović Tomislav Herceg

Abstract

This paper aims to identify the possible implications of quantity competition in markets with differentiated products on entry deterrence. If capacity commitments characterise this industry, quantities can be expected as the choice variable of rational players, even in the presence of product differentiation. Different equilibria of a static game occur depending on the degree of asymmetry of players, incumbent and entrant, which will crucially affect the shape of their best response functions. Asymmetry can stem from players’ advantage in demand and costs, their different objective functions, or the first-mover advantage. We will analyse entry where incumbent maximises the weighted average of profit and revenue while entrant is maximising profit. The reduction of asymmetry may intensify competition in the industry and, consequently, reduce entry barriers. Our findings provide an insight that could be used for practical recommendations for conducting competition policy and other sector-specific regulations, where the introduction and higher intensity of competition are desirable.

Article Details

How to Cite
Ristić, B., Trifunović, D., & Herceg, T. (2021). CAPACITY COMPETITION IN DIFFERENTIATED OLIGOPOLIES: ENTRY DETERRENCE WITH ALTERNATIVE OBJECTIVE FUNCTIONS. The South East European Journal of Economics and Business, 16(1), 84-92. Retrieved from http://journal.efsa.unsa.ba/index.php/see/article/view/1551
Section
Scientific and Professional papers: Economics and Business
Author Biographies

Bojan Ristić, Faculty of Economics, University of Belgrade

Bojan Ristić, PhD
Assistant Professor
Faculty of Economics, University of Belgrade
E-mail: bojan.ristic@ekof.bg.ac.rs
ORCID: 0000-0002-9883-8914

Dejan Trifunović, Faculty of Economics, University of Belgrade

Dejan Trifunović, PhD
Full Professor
Faculty of Economics, University of Belgrade
E-mail: dejan.trifunovic@ekof.bg.ac.rs
ORCID: 0000-0003-2125-8142

Tomislav Herceg, Faculty of Economics and Busines, University of Zagreb

Tomislav Herceg, PhD (corresponding author)
Assistant Professor
Faculty of Economics and Business,
University of Zagreb
E-mail: therceg@efzg.hr
Address: Trg J. F. Kennedyja 6, 10000 Zagreb
ORCID: 0000-0001-8869-6775