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Title:Profitable cannibalization PDF Logo
Authors:Schulz, Norbert
Issue Date:2001
Series/Report no.:Würzburg economic papers 27
Abstract:Using a model with switching costs it is shown that firms may have an incentive to set up a new firm supplying to the same market under quite general conditions. The new firm attracts some market share of the founding firm. The start up firm is thus an act of cannibalization. Moreover, entry of the new firm may increase average prices. This is due to the fact that the new firm has more difficulties to overcome switching costs than incumbent firms. Competition may therefore be less intense.
Subjects:oligopoly
switching costs
price-increasing entry
JEL:D43
L13
L41
Document Type:Working Paper
Appears in Collections:W.E.P. - Würzburg Economic Papers, Lst. f. VWL, Geld u. internat. Wirtschaftsbeziehungen, Universität Würzburg

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