Threat of entry, asymmetric information, and pricing
This paper examines the impact of asymmetric information on incumbent firms' propensity to engage in limit pricing when faced with threat of entry. I draw from information economics to argue that incumbents will use price to respond ex ante to entry in situations characterized by asymmetric inf...
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| Veröffentlicht in: | Strategic management journal 2013-04, Vol.34 (4), p.426-444 |
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| container_end_page | 444 |
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| container_title | Strategic management journal |
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| creator | SEAMANS, ROBERT C. |
| description | This paper examines the impact of asymmetric information on incumbent firms' propensity to engage in limit pricing when faced with threat of entry. I draw from information economics to argue that incumbents will use price to respond ex ante to entry in situations characterized by asymmetric information. I suggest two situations in which asymmetric information can arise: when potential entrants are from outside the primary industry and when incumbent firms are members of R&D consortia. I then study pricing in the U.S. cable TV industry to show that pricing patterns of incumbent cable TV systems are consistent with limit pricing when the relationship between the incumbent and potential entrant is characterized by asymmetric information. |
| doi_str_mv | 10.1002/smj.2017 |
| format | Article |
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Mgmt. J</addtitle><date>2013-04-01</date><risdate>2013</risdate><volume>34</volume><issue>4</issue><spage>426</spage><epage>444</epage><pages>426-444</pages><issn>0143-2095</issn><eissn>1097-0266</eissn><coden>SMAJD8</coden><abstract>This paper examines the impact of asymmetric information on incumbent firms' propensity to engage in limit pricing when faced with threat of entry. I draw from information economics to argue that incumbents will use price to respond ex ante to entry in situations characterized by asymmetric information. I suggest two situations in which asymmetric information can arise: when potential entrants are from outside the primary industry and when incumbent firms are members of R&D consortia. 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| identifier | ISSN: 0143-2095 |
| ispartof | Strategic management journal, 2013-04, Vol.34 (4), p.426-444 |
| issn | 0143-2095 1097-0266 |
| language | eng |
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| source | Wiley Journals; JSTOR Archive Collection A-Z Listing |
| subjects | Asymmetric information Cable television Cable television industry Cable TV Competition Consortia Corporate strategies Economic theory entry incumbent response Incumbents Industrial economics Industrial management Information asymmetry Information economics Market entry price Prices Pricing Pricing policies R&D Research & development Research and development Signals Strategic management Studies U.S.A |
| title | Threat of entry, asymmetric information, and pricing |
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