| Abstract: | In this paper, we investigate the possibility that a dominant firm will encourage rather than deter entry of a potential competitor. We find that entry can be encouraged by a dominant firm in order to induce a new entrant to resolve the demand uncertainty in a new market. We propose a specific incentive mechanism that the incumbent can use to encourage entry and find plausible circumstances under which entry encouragement is a dominant competitive strategy.INSEADInstituto de Analisis EconomicoINSEAD |
