Raising Rivals' Fixed Costs

Hviid, Morten and Olczak, Matthew (2016) Raising Rivals' Fixed Costs. International Journal of the Economics of Business, 23 (1). pp. 19-36. ISSN 1357-1516

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Abstract

This article demonstrates that raising fixed costs can serve as a credible mechanism for a well placed firm to exclude its rivals. We identify a number of credible avenues, such as increased regulation, vexatious litigation and increased prices for essential inputs, through which such a firm can raise fixed costs. We show that for a wide range of oligopoly models this may be a profitable strategy, even if the firm’s own fixed costs are affected as much (or even more) than its rivals and even if it is less efficient. The resulting reduction in the number of firms in the market is detrimental to consumer welfare and hence worthy of scrutiny by competition and regulatory authorities.

Item Type: Article
Additional Information: This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/Licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited
Uncontrolled Keywords: raising rivals costs,fixed costs,exclusion,entry deterrence,monopolisation
Faculty \ School: Faculty of Social Sciences > School of Law
Depositing User: Pure Connector
Date Deposited: 14 Jan 2016 11:00
Last Modified: 01 Nov 2020 00:41
URI: https://ueaeprints.uea.ac.uk/id/eprint/56306
DOI: 10.1080/13571516.2015.1055913

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