"A note on credible spatial entry deterrence"
JEL codes: D42, L12
Keywords: entry deterrence, product differentiation, endogenous timing
Abstract: This note revisits the question of spatial entry deterrence to investigate the credibility of preemption by crowding in a differentiated market. Judd (1985) argues that preemption by crowding is not a credible entry barrier because an incumbent monopolist has an ex post incentive to withdraw its products in response to entry. We demonstrate that preemption by crowding may be a credible entry barrier if multiple potential entrants choose the timing of entry endogenously.