Entry Barriers, Limit Pricing, and Incomplete Information

Abstract

The aim of this work is to describe some of the major contributions to the theory of oligopoly with free entry, tracing the evolutionary phases and clarifying the interconnections between different models. In particular we will first analyze the starting contributions of the 1950’s which gave rise to the so-called limit pricing theory; then we will introduce the role of capacity in deterring entry; finally we will analyze a model with incomplete information in which both established and potential firms are not fully informed about others’ cost functions