ABSTRACT
There is a fine difference between policies implemented pre-entry which are designed to block entry, and those which may be used post-entry to cause exit or, at least, to limit the market penetration of entrants. For example, a limit pricing strategy involves price cutting prior to entry to deter putative competitors, while predatory pricing strategies may be used post-entry to drive out new competitors. Somewhere in between these two strategies is what has come to be called ‘entry regulation’. Although it is a strategy designed to limit the rate at which entrants penetrate into a market, this type of strategy is also a useful way to think about the two options open to incumbents facing entry, accommodation or deterrence, in an explicitly dynamic context. This basic choice involves sacrificing current profits to maintain market power over the medium to long run (the deterrence option) or earning high current returns at the cost of allowing entry (the accommodation option) and so suffering an erosion in market power over the medium to long run.
