Data di Pubblicazione:
2018
Citazione:
Brighi, L. e M., D'Amato. "Private Information and the Commitment Value of Unobservable Investment" Working paper, RECENT WORKING PAPER SERIES, Dipartimento di Economia Marco Biagi – Università di Modena e Reggio Emilia, 2018.
Abstract:
The commitment value of unobservable investment with cost-reducing effects is examined in an entry
model where the incumbent is privately informed about his costs of production. We show that when the
price signals incumbent’s costs, unobservable investment can not have any commitment value and the
limit price does not limit entry. By contrast, if the price does not reveal costs, which is the more likely
outcome, unobservable investment has a magnified value of commitment and a less aggressive limit price
deters profitable entry.
model where the incumbent is privately informed about his costs of production. We show that when the
price signals incumbent’s costs, unobservable investment can not have any commitment value and the
limit price does not limit entry. By contrast, if the price does not reveal costs, which is the more likely
outcome, unobservable investment has a magnified value of commitment and a less aggressive limit price
deters profitable entry.
Tipologia CRIS:
Working paper
Keywords:
Commitment, entry deterrence, limit pricing, signaling
Elenco autori:
Brighi, L.; D'Amato, M.
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