L18: Entry Deterrence

Question 1

barriers to entry

Answer 1

anything that allows incumbents to earn profits

government regulation: entry regulation, lags due to compliance costs

firm attributes: EOS, cost advantages, differentiation

firm strategic behaviour: entry accommodation, entry deterrence, predation

Question 2

examples of investment on barriers to entry

Answer 2

to be effective, barriers to entry must be credible and have commitment value

physical capital
- production capacity

clientele and switching costs
- reduces consumer demand for potential entrant
- loyalty revolution

franchise networks
- exclusive dealing allows for limiting access by entrant

Question 3

killer acquisitions

Answer 3

to deter entrance, buy potential entrants

incumbents acquire entrants
- goal is not to merge but to prevent future competition