Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 560: Strategic Investment and Market Integration

Mattias Ganslandt ()
Additional contact information
Mattias Ganslandt: The Research Institute of Industrial Economics, Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden

Abstract: The competitive effect of international market integration in industries with imperfect competition is of great policy interest. This paper focuses on the link between monopolization and market segmentation. It presents a model of multi-market entry deterrence with or without market commitments. We derive sufficient conditions for entry deterrence with productive capacity in the multi-market game. It is shown that to deter entry in the multi-market game, the first-mover installs productions capacity which is strictly larger than the capacity needed to deter entry, if it is possible to assign parts of the capacity to specific markets. Market integration for production capacity may, thus, have a pro-competitive effect in international markets.

Keywords: Entry Deterrence; Multi-Market Competition; Market Integration

JEL-codes: F12; F15; L12

30 pages, June 27, 2001

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