[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/wzb/wzebiv/fsiv00-19.html
   My bibliography  Save this paper

Incentives to Grow: Multimarket Firms and Predation

Author

Listed:
  • Rainer Nitsche
Abstract
Network industries with low sunk costs have been popular examples for the theory of contestable markets and spatial competition models. We argue that, due to the multimarket nature of operations, theories of predation are more relevant to explain strategic behaviour. Building on well established reputation models our contribution is threefold. First, we use a more realistic sequencing of the game and strengthen the entry deterrence result. Second, we show that rational multimarket firms may use (the threat of) predatory entry to expand. Third, we allow strategic interaction of two multimarket firms and find that multimarket firms do not "attack'' each other. ZUSAMMENFASSUNG - (Expansionsanreize: Multimarktunternehmen und Verdrängungsstrategien) Netzwerkindustrien mit geringen versunkenen Kosten dienten häufig als Anwendungsfelder für die Theorie der bestreitbaren Märkte und für Modelle des räumlichen Wettbewerbs. In der vorliegenden Arbeit wird argumentiert, daß aufgrund der Multimarktnatur dieser Branchen Theorien des Verdrängungsverhaltens eine relevantere Erklärung des strategischen Verhaltens liefern. Auf der Basis der etablierten Reputationsmodelle werden drei Neuerungen entwickelt. Erstens wird eine Spielsequenz eingeführt, die nicht nur realistischer ist als die herkömmliche Modellierung, sondern auch zu einer plausibleren Prognose führt: Verhinderung von Markteintritt in sämtlichen Märkten. Zweitens wird gezeigt, daß rationale Multimarktunternehmen die Drohung eines Markteintritts mit anschließender Verdrängung des alteingesessenen "Mittelständlers" (Einmarktunternehmens) im Rahmen einer Expansionsstrategie glaubhaft nutzen können. Schließlich wird, drittens, die strategische Interaktion von zwei Multimarktunternehmen untersucht. Es zeigt sich, daß sie auf gegenseitigen "Angriff" verzichten und nicht in einen Markt des jeweils anderen Multimarkt-Wettbewerbers eindringen.

Suggested Citation

  • Rainer Nitsche, 2000. "Incentives to Grow: Multimarket Firms and Predation," CIG Working Papers FS IV 00-19, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
    • Handle: RePEc:wzb:wzebiv:fsiv00-19
    as

    Download full text from publisher

    File URL: http://skylla.wz-berlin.de/pdf/2000/iv00-19.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Fudenberg, Drew & Tirole, Jean, 1991. "Perfect Bayesian equilibrium and sequential equilibrium," Journal of Economic Theory, Elsevier, vol. 53(2), pages 236-260, April.
    2. Hendel, Igal, 1996. "Competition under Financial Distress," Journal of Industrial Economics, Wiley Blackwell, vol. 44(3), pages 309-324, September.
    3. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
    4. Schmidt, Klaus M, 1993. "Reputation and Equilibrium Characterization in Repeated Games with Conflicting Interests," Econometrica, Econometric Society, vol. 61(2), pages 325-351, March.
    5. Bolton, Patrick & Scharfstein, David S, 1990. "A Theory of Predation Based on Agency Problems in Financial Contracting," American Economic Review, American Economic Association, vol. 80(1), pages 93-106, March.
    6. Drew Fudenberg & David K. Levine, 2008. "Reputation And Equilibrium Selection In Games With A Patient Player," World Scientific Book Chapters, in: Drew Fudenberg & David K Levine (ed.), A Long-Run Collaboration On Long-Run Games, chapter 7, pages 123-142, World Scientific Publishing Co. Pte. Ltd..
    7. Cripps, Martin W & Thomas, Jonathan P, 1995. "Reputation and Commitment in Two-Person Repeated Games without Discounting," Econometrica, Econometric Society, vol. 63(6), pages 1401-1419, November.
    8. Shepherd, William G, 1984. ""Contestability" vs. Competition," American Economic Review, American Economic Association, vol. 74(4), pages 572-587, September.
    9. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    10. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August.
    11. Jean-Pierre Benoit, 1984. "Financially Constrained Entry in a Game with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 490-499, Winter.
    12. Milgrom, Paul & Roberts, John, 1982. "Predation, reputation, and entry deterrence," Journal of Economic Theory, Elsevier, vol. 27(2), pages 280-312, August.
    13. Masso, Jordi, 1996. "A Note on Reputation: More on the Chain-Store Paradox," Games and Economic Behavior, Elsevier, vol. 15(1), pages 55-81, July.
    14. Robert Evans & Jonathan P. Thomas, 1997. "Reputation and Experimentation in Repeated Games with Two Long-Run Players," Econometrica, Econometric Society, vol. 65(5), pages 1153-1174, September.
    15. Dodgson, J. S. & Newton, C. R. & Katsoulacos, Y., 1992. "A modelling framework for the empirical analysis of predatory behaviour in the bus services industry," Regional Science and Urban Economics, Elsevier, vol. 22(1), pages 51-70, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sorin, Sylvain, 1999. "Merging, Reputation, and Repeated Games with Incomplete Information," Games and Economic Behavior, Elsevier, vol. 29(1-2), pages 274-308, October.
    2. Melkonian, Tigran A., 1998. "Two essays on reputation effects in economic models," ISU General Staff Papers 1998010108000012873, Iowa State University, Department of Economics.
    3. Celentani, Marco & Pesendorfer, Wolfgang, 1996. "Reputation in Dynamic Games," Journal of Economic Theory, Elsevier, vol. 70(1), pages 109-132, July.
    4. Marco Celentani & Drew Fudenberg & David K. Levine & Wolfgang Pesendorfer, 2008. "Maintaining A Reputation Against A Long-Lived Opponent," World Scientific Book Chapters, in: Drew Fudenberg & David K Levine (ed.), A Long-Run Collaboration On Long-Run Games, chapter 9, pages 163-176, World Scientific Publishing Co. Pte. Ltd..
    5. Wolitzky, Alexander, 2011. "Indeterminacy of reputation effects in repeated games with contracts," Games and Economic Behavior, Elsevier, vol. 73(2), pages 595-607.
    6. Bolton, Gary E. & Ockenfels, Axel & Ebeling, Felix, 2011. "Information value and externalities in reputation building," International Journal of Industrial Organization, Elsevier, vol. 29(1), pages 23-33, January.
    7. Joyee Deb & Yuhta Ishii, 2016. "Reputation Building under Uncertain Monitoring," Cowles Foundation Discussion Papers 2042, Cowles Foundation for Research in Economics, Yale University.
    8. Jeffrey C. Ely & Juuso Välimäki, 2003. "Bad Reputation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(3), pages 785-814.
    9. David Hugh-Jones & Ro’i Zultan, 2013. "Reputation and Cooperation in Defense," Journal of Conflict Resolution, Peace Science Society (International), vol. 57(2), pages 327-355, April.
    10. Drew Fudenberg & David Levine & Wolfgang Pesendorfer, 2008. "When Are Nonanonymous Players Negligible?," World Scientific Book Chapters, in: Drew Fudenberg & David K Levine (ed.), A Long-Run Collaboration On Long-Run Games, chapter 6, pages 95-120, World Scientific Publishing Co. Pte. Ltd..
    11. Dilip Abreu & David G. Pearce, 2006. "Reputational Wars of Attrition with Complex Bargaining Postures," Levine's Working Paper Archive 122247000000001218, David K. Levine.
    12. Ely, Jeffrey & Fudenberg, Drew & Levine, David K., 2008. "When is reputation bad?," Games and Economic Behavior, Elsevier, vol. 63(2), pages 498-526, July.
    13. Mailath, George J. & Samuelson, Larry, 2015. "Reputations in Repeated Games," Handbook of Game Theory with Economic Applications,, Elsevier.
    14. Hausken, Kjell, 2007. "Reputation, incomplete information, and differences in patience in repeated games with multiple equilibria," Economics Letters, Elsevier, vol. 97(2), pages 138-144, November.
    15. Atakan, Alp E. & Ekmekci, Mehmet, 2015. "Reputation in the long-run with imperfect monitoring," Journal of Economic Theory, Elsevier, vol. 157(C), pages 553-605.
    16. Stefano Barbieri & Marco Serena, 2021. "Reputation for Toughness," Working Papers tax-mpg-rps-2021-16, Max Planck Institute for Tax Law and Public Finance.
    17. Justus Haucap & Jörn Kruse, 2004. "Verdrängungspreise auf Telekommunikationsmärkten?," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 5(3), pages 337-361, August.
    18. Atakan, Alp Enver & Ekmekci, Mehmet, 2014. "Reputation in Repeated Moral Hazard Games," MPRA Paper 54427, University Library of Munich, Germany.
    19. Calabuig, Vicente & Olcina, Gonzalo, 2000. "Commitment and strikes in wage bargaining," Labour Economics, Elsevier, vol. 7(3), pages 349-372, May.
    20. Lu, Yang K., 2013. "Optimal policy with credibility concerns," Journal of Economic Theory, Elsevier, vol. 148(5), pages 2007-2032.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wzb:wzebiv:fsiv00-19. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jennifer Rontganger (email available below). General contact details of provider: https://edirc.repec.org/data/cicwzde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.