Entry Deterrence
Strategies used by incumbent firms to prevent or discourage new competitors from entering the market, such as through limit pricing, capacity expansion, or creating high barriers to entry.
Implications
Strategies used by established firms to discourage new competitors from entering the market, often involving tactics like aggressive pricing, exclusive contracts, or heavy investment in innovation to create a strong competitive position.
Example
Example: A leading airline engages in entry deterrence by offering significant discounts on key routes whenever a new competitor tries to enter the market, making it unprofitable for the newcomer to compete.
Related Terms
Different from entry barriers, which are often structural and inherent to the industry, entry deterrence involves deliberate actions taken by incumbents to protect their market position.
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