Raising rivals' fixed costs

Research output: Working paper

Abstract

This paper analyses the strategic use of fixed costs to deter entry or monopolize a market in a standard Cournot framework. First of all a general case shows how the presence of fixed costs can affect the possible equilibria to the Cournot game. It is shown that the presence of a firm with a first-mover advantage can have important implications if fixed costs are raised. In addition the forward induction process becomes important in determining plausible equilibria. The use of firstly regulation and secondly ‘nuisance’ law-suits are considered as strategies to increase fixed costs.
Original languageEnglish
Place of PublicationNorwich (UK)
PublisherUniversity of East Anglia
DOIs
Publication statusPublished - Jan 2005

Publication series

NameCCP working paper
PublisherCentre for Competition Policy
No.05-1
ISSN (Print)1745-9648

Keywords

  • fixed cost
  • raising rivals’ costs
  • entry deterrence
  • monopolization
  • regulation
  • nuisance law-suits

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  • Cite this

    Olczak, M. (2005). Raising rivals' fixed costs. (CCP working paper; No. 05-1). University of East Anglia. https://doi.org/10.2139/ssrn.891051