According to Dixit and Spence, the Capacity of the Incumbent

question 2

Multiple Choice

According to Dixit and Spence, the capacity of the incumbent firm must be large enough that the threat to produce an entry-preventing level of output is

• A) credible
• B) noncredible
• C) random

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Definitions:

Distributive Negotiation

Focuses on ‘win–lose’ claims made by each party for certain preferred outcomes.

Win-Lose Claims

Situations in negotiations or disputes where one party's gain is directly at the expense of another, creating a winner and a loser.

Principled

Operating according to ethical standards and specific, often moral, principles.

Avoidance

Pretends that a conflict doesn’t really exist.