COWLES FOUNDATION FOR RESEARCH IN
ECONOMICS Box 208281
COWLES FOUNDATION DISCUSSION PAPER NO. 576 "Duopoly with Differentiated Products and Entry Barriers" Kofi O. Nti and Martin Shubik January 1981 Product differentiated duopoly with a potential entrant facing a single period fixed cost entry barriers is modeled as a noncooperative game. In addition to characterizing the equilibrium solutions and relating them to entry costs and product differentiation, a comparison of price and quantity competition shows that entry conditions are qualitatively sensitive to the strategic variables used in a given industry. Quantity competition appears to be more favorable for entry than price competition. The use of threats and other exclusionary tactics, such as limit pricing, decisively determine the outcome when entry costs are moderate. |
