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- W2155188214 abstract "We analyze industrial espionage extending the Milgrom and Roberts (1982) (hereafter MR) model. More precisely, we consider the case where a monopoly (M) is engaged in R&D trying to reduce his cost of production and deter a potential entrant (E) from entering the market. The R&D project may be successful or not and its outcome is a private information of M. The entrant has an access to an IS of a certain precision that generates a noisy signal on the outcome of the R&D project, and she decides whether or not to enter the market based on two signals: the price charged by M and the signal sent by the IS. It is assumed that the precision of the IS is exogenous and common knowledge. We show that the separating equilibria of our model coincide with that of MR. The same result is obtained for pooling equilibria if the precision of the IS is sufficiently low to affect the decision of E of staying out. For the other extreme, if the IS is very accurate, then contrary to the MR model, pooling equilibrium does not exist. For intermediate values of the precision, the set of pooling equilibria is non-empty and E enters if the IS tells her the R&D project was not successful. Since in the MR model the entrant never enters in a pooling equilibrium, we show that the use of the IS by the potential entrant with high probability increases competition in pooling equilibrium." @default.
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- W2155188214 date "2013-01-01" @default.
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- W2155188214 title "Entry with Two Correlated Signals" @default.
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