Advertising and Post-Entry Oligopoly Behaviour

Warning: is_dir(): open_basedir restriction in effect. File(/libraries) is not within the allowed path(s): (/home/web1050:/usr/share/php) in libraries_get_libraries() (line 176 of /home/web1050/public_html/sites/all/modules/contrib/libraries/libraries.module).

This paper uses a two stage methodology to examine the advertising response to new entry by incumbent firms. In the first stage, time-series regressions are employed to identify the advertising responses for a sample of 42 companies in consumer goods markets. In the second stage, cross-section analysis is used to model the factors which might explain the post-entry increase in advertising. The results suggest a systematic response by dominant firms in static markets and support the view that entry deterring behaviour is most likely where other entry barriers are already present.