Essays on entry

James, Timothy Jon (1992) Essays on entry. University of Southampton, Doctoral Thesis.

Abstract

This thesis is composed of six essays on the subject of entry. The essays are mainly theoretical in nature and cover a number of different issues. Essay 1 looks at the existing empirical diversification literature (mainly for the UK and USA) to provide clues as to the extent, nature, and effect of entry in mature industrial economies. Essay 2 uses a reaction function model to examine two relatively neglected areas in the entry deterrence literature; first, it considers the incumbent's fundamental choice as to whether it should attempt to deter or accommodate entry; secondly, it analyses the likely use of limit pricing as opposed to fixed costs as barriers to entry. Essay 3 uses a game theoretic framework where a number of potential entrants are mutually aware and make a simultaneous entry decision to demonstrate the existence of the perverse result that a rise in the number of potential entrants may actually reduce the overall probability of entry to an industry. Essay 4 examines both the conventional and informational limit pricing literature and provides a critique of it by examining its validity from an entrant's perspective. Essay 5 looks at the form and causes of welfare differences between free entry and regulation of an industry, providing numerical examples to show that the potential welfare divergence between these two can be large. Essay 6 introduces and provides a rationale for y-efficiency. That is, a simple abstract index that seeks to explain inefficiencies in the provision of optimal products (from a welfare perspective) due to too much or too little competition.

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