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In the Dixit-Spence Model, the Incumbent Firm Prevents Entry by Threatening

question 11

Essay

In the Dixit-Spence model, the incumbent firm prevents entry by threatening to produce a level of output beyond the limit quantity. What makes this threat credible?


Definitions:

Instincts

are innate, typically fixed patterns of behavior in animals and humans that are responses to specific stimuli and serve survival and reproductive purposes.

Cognition

Refers to the mental processes involved in gaining knowledge and comprehension, including thinking, knowing, remembering, judging, and problem-solving.

Seligman

Refers to Martin Seligman, a psychologist known for his work on the theory of learned helplessness and for promoting positive psychology.

Prepared Behaviors

Instinctual or predisposed behaviors that organisms are born with, which enhance survival and adaptation.

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