An incumbent announces it will significantly increase output in the next period,but only has contracts for the amount produced this period.The announcement is a
A) credible threat.
B) non-credible threat.
C) commitment.
D) mixed strategy.

Question

Quizplus · Accepted Answer

An incumbent's announcement to increase output in the next period without having contracts for the increased amount is a non-credible threat. The announcement is merely a bluff to deter potential market entry by competitors as there is no guarantee that the incumbent will follow through with their announcement.

An Incumbent Announces It Will Significantly Increase Output in the Next