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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/14097
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| Title: | Product Scope and Bilateral Entry Deterrence in Converging Technology Industries |
| Authors: | Mantena, Ravi
Sundararajan, Arun |
| Keywords: | imperfect competition
scope
entry
digital convergence
industry convergence
technological process
horizontal differentiation
location model |
| Issue Date: | 2005 |
| Publisher: | Stern School of Business, New York University |
| Series/Report no.: | CeDER-05-01 |
| Abstract: | We model the bilateral threat of entry between firms in two industries,
which is characteristic of a number of IT industries. An endogenous
choice of product scope by firms in each industry affects both the
extent of product differentiation for incumbent oligopolists as well as
the fixed costs of a potential entrant. Our analysis establishes unique
symmetric equilibrium choices of scope and price, both in the absence
and the presence of an entry threat. When entry is threatened
bilaterally, in equilibrium, firms may symmetrically either deter entry
into their core industry, or accomodate it while entering the
neighboring industry. Even in the absence of technological shocks, we
show how steady progress in technology can result in switching between
these equilibria, leading to the periodic and sudden shifts in industry
concentration and firm profitability; such shifts have been observed
during the "competitive crash" in the computer industry, and
more recently, on account of digital convergence. |
| URI: | http://hdl.handle.net/2451/14097 |
| Appears in Collections: | IOMS: Information Systems Working Papers
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