Which of the following is not a condition under which an incumbent firm can successfully deter entry by holding excess capacity?
A)The investment in excess capacity must be sunk prior to entry
B)The incumbent should have a sustainable cost advantage
C)Market demand growth should be slow
D)The potential entrant should not itself be attempting to establish a reputation for toughness
E)The excess capacity investment must be recoverable prior to entry

Question

Quizplus · Accepted Answer

The condition that the excess capacity investment must be recoverable prior to entry is necessary because it ensures that the incumbent firm can recoup its investment before potential entrants can enter the market and compete away profits. The other options (A, B, C, and D) are all conditions that must be met for an incumbent to successfully deter entry by holding excess capacity.

Which of the Following Is Not a Condition Under Which