#4805. Pricing and entry strategies for competitive firms with optimistic entrant

August 2026publication date
Proposal available till 27-05-2025
4 total number of authors per manuscript0 $

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Journal’s subject area:
Business and International Management;
Strategy and Management;
Management Science and Operations Research;
Management of Technology and Innovation;
Computer Science Applications;
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Abstract:
Entrepreneurs are usually optimistic when entering an existing market. We introduce the entrants optimism into the game models of entry deterrence to study the entry strategy of the potential entrant and the pricing (deterrence) strategy of the incumbent. Further, we examine the impacts of the entrants optimism on the optimal decisions for both firms in the post-entry game (Stackelberg price competition). In the price ex-post setting, our analysis shows that in the post-entry game, the entrants optimism increases both firms’ prices and could benefit both firms. For the entry strategy, the high optimism of the entrant induces an incorrect entry decision; and our results reveal that the low optimism of the entrant benefits her entry. As for the pricing strategy, the incumbent will blockade the low optimistic entrant by keeping the normal price, impede the moderately optimistic entrant by lowering price, or accommodate the high optimistic entrant by setting the post-entry price. We find that the asymmetric information could not make the entrant benefit from her optimism, which is inconsistent with the symmetric information case.
Keywords:
behavioural operations research; entry strategy; game theory; optimism; pricing

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