Freedom of Entry and the Existence of Pure Profit

Eaton, B. Curtis; Lipsey, Richard G.

doi:10.2307/2232046

Cited by 159 publications

(45 citation statements)

References 16 publications

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“…Under conditions assumed here, a firm will always choose to "locate" or position its variety in the center of that variety's market segment [Eaton and Lipsey (1978)] so sales are made over V "distance" in both directions from its location, given similar prices from proximate sellers. In this case, V=T/2N, where N is the number of varieties.…”

Section: Consumer Demand For Product Varietiesmentioning

confidence: 99%

“…Firms may position their varieties along the variety spectrum in such a way as to deter entry even though positive profits remain. This possibility arises when varieties are dispersed in such a way that all varieties can be produced at a positive profit but there is not sufficient room between any two existing varieties for another profitable entrant [Eaton and Lipsey (1978)]. Indeed, firms may have incentives to offer several varieties strategically located so as to deter entry.…”

Section: Conclusion: Empirical Evidence Of Rising Prices Reconsideredmentioning

confidence: 99%

“…See endnote 8 in this regard. Evenly distributed varieties result in this case [Eaton and Lipsey (1978)], and this along with identical cost conditions, identical evenly distributed consumers, and identical price conjectures yields identical prices for all sellers [Capozza and Van Order (1978)]. …”

Section: Conclusion: Empirical Evidence Of Rising Prices Reconsideredmentioning

confidence: 99%

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Increasing product variety and rising prices

Benson

1990

Rev Ind Organ

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Rising average prices have been observed following establishment of new varieties of ready-to-eat cereals, and with entry in the physicians' services market. Most explanations require monopoly or collusion, and/or consumer ignorance. Prices can rise in a non-cooperative market setting with full consumer knowledge, however, given preferences for different varieties. Demand for a particular variety becomes less elastic with entry if a seller loses the most elastic individual demands for that variety to the new substitute while retaining the least elastic consumer demands. Thus, price rises. Total purchases of all varieties also increase.

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Section: Consumer Demand For Product Varietiesmentioning

confidence: 99%

Section: Conclusion: Empirical Evidence Of Rising Prices Reconsideredmentioning

confidence: 99%

Section: Conclusion: Empirical Evidence Of Rising Prices Reconsideredmentioning

confidence: 99%

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Increasing product variety and rising prices

Benson

1990

Rev Ind Organ

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“…We use the term positioning rather than commitment as it conveys a relationship to customers and competitors as well as indicating the firm's spending strategy. Some of the important contributions to the commitment literature are Bloch (1974), Eaton (1976), Rothschild (1976Rothschild ( , 1979, Spence (1986), Schmalensee (1978), Eaton and Lipsey (1978, 1979, 1980, Salop (1979), Dixit (1980), West (1981), Gilbert and Harris (1984), Bulow et al (1985), Fudenberg and Tirole (1984), Sutton (1991), and Bhattacharya and Bloch (2000). A variety of commitment strategies are examined, including the proportion of total costs that are sunk, expenditure on the maintenance of sunk assets, the location of firms, investments in product design and development, advertising, the hoarding of key inputs, and so forth.…”

Section: Introductionmentioning

confidence: 99%

Does Market Size Matter? A Dynamic Model of Oligopolistic Market Structure, Featuring Costs of Creating and Maintaining a Market Position

2013

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In their efforts to create a position in a market, and to maintain that position, firms make positioning investments of various sorts, in R&D, plant, advertising, and location, or more generally, in product development and maintenance. The heart of this paper is the hypothesis that the success of these positioning investments is not assured. In an environment where the success of positioning investments is stochastic, the positioning game played by firms that compete to serve a market is necessarily dynamic. We model the positioning and operating decisions of firms in an environment of this sort.When the market is large enough to support at least one active firm, the expected number of firms serving the market at a point in time is a nearly continuous function of market size, in sharp contrast to the familiar integer valued step function seen in classic models of market structure. As a result, equilibrium expected total surplus and expected consumer surplus are higher than standard non-stochastic models would suggest, especially in circumstances where the expected number of firms is small. This suggests that classic models of market structure are not always a sound guide for policy.

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“…the 'no mill-price undercutting' condition holds (Eaton and Lipsey, 1978). This condition implies that firms commit not to undercut their opponents, i.e.…”

mentioning

confidence: 99%