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Title: Economies of Scope, Entry Deterrence and Welfare
Catalão-Lopes, Margarida
Keywords: Economies of scope
Entry deterrence
Asymmetric information
Issue Date: Jun-2013
Citation: PIRES, CESALTINA PACHECO; Catalão-Lopes, Margarida. Economies of Scope, Entry Deterrence and Welfare, The B.E. Journal of Economic Analysis & Policy, 14, 1, 419-452, 2013.
Abstract: This paper develops a model where the incumbent may expand to a related market to signal economies of scope and deter entry in the former market. We show that the incumbent only expands when scope economies are large enough. Thus expansion is a signal of larger economies of scope and, for certain parameter values, leads to entry deterrence. Although our game is twoperiod, the expansion strategy creates a long-term advantage. We further investigate the implications of prohibiting an entry-deterrent expansion. A major finding is that, in our model, this prohibition always decreases consumer surplus. In terms of global welfare, the impact is ambiguous but negative for many parameter values.
ISSN: 1935-1682
Type: article
Appears in Collections:CEFAGE - Publicações - Artigos em Revistas Internacionais Com Arbitragem Científica
GES - Publicações - Artigos em Revistas Internacionais Com Arbitragem Científica

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