We show that location can serve as a signal which deters or accommodates entry when there is asymmetric cost information. Location may allow or prevent the entrant from inferring the incumbent’s cost advantage. The analysis provides two new insights. First, the market center may be used to deter entry by a high cost incumbent who would accommodate entry under complete information. Second, a low cost incumbent may accommodate entry and locate away from the center, while she would deter entry by locating at the center under complete information. (C) 2002 Elsevier Science B.V. All rights reserved.
Entry preventing locations under incomplete information
3 April 2018