Capital, Commitment, and Entry Equilibrium

Abstract

A primary concern of recent oligopoly literature has been the use of product-specific capital to impose asymmetric market solutions, including the deterrence of entry. This article explores the surprisingly neglected topic of the correspondence between the nature of product-specific capital (PSC) and the properties of entry equilibrium. The nature of PSC determines the type of entry with which firms must be concerned (predatory entry, where the entrant replaces an existing firm, or augmenting entry, where the entrant does not), the instruments available to effect asymmetry, the ability to impose asymmetric solutions, and their profitability.