The aim is to introduce competition gradually but maintain some monopoly to deter entry into the market.
Sunk costs therefore increase the risk and deter entry.
One way the incumbent can deter entry is to produce a higher quantity at a lower price than the monopoly level, a strategy known as limit pricing.
One way of using this advantage to deter entry is to charge a price less than the monopoly level.
An incumbent who is trying to strategically deter entry can do so by attempting to reduce the entrant's payoff if it were to enter the market.
It was preferable to deter entry rather than kill.
Washington tried to deter Japanese entry into the war by threatening the firebombing of Japanese cities using B.-17 strategic bombers based in the Philippines.
To the Editor: A Sept. 29 editorial suggests that the solution to illegal immigration is to deter entry at the border.
Such switching costs can serve to facilitate collusion and to deter competitive entry (Klemperer, 1987).
The security smoke market developed as an alternative security method, designed not to deter entry, but to prevent loss if a thief did gain access.