Strategic entry deterrence.
Entrant
Incumbent
Stay out
Enter
Fight
Share
(
π
M
,
0
)
(
π
W
,
π
W
)
(
π
S
,
π
S
)
π
M
> π
S
> 0 > π
W
w
A potential entrant who
believes
the threat to maintain output will
be deterred.
w
But the Sylos postulate is not a
credible threat
, since incumbent
has no incentive to carry it out once entry has occurred.
w
π
S
> π
W
