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    Uncertainty in Maintaining Market Power

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    Why is uncertainty a key to the success of entry deterrence?

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    Entry deterrence is dependent limit pricing or predatory pricing. However, each of these depends primarily upon uncertainty, or imperfect information, to dissuade entrants to the industry.

    Predatory pricing is one mechanism of entry deterrence. It involves lowering prices in such a way as to harm new competitors. Potential entrants do not initially know for certain whether the incumbent has a preference for fighting entry. Research indicates that even if the firm is considered "rational" entry ...

    Solution Summary

    Uncertainty in maintaining market power and the relationship of uncertainty to entry deterrence.