ENTRY DETERRENCE IN THE COMMONS

We analyze a common property resource model with a single incumbent firm that faces future potential entry of a rival. The cost of harvest from the resource is a function of the stock size. By drawing down current stock sufficiently, which lowers future stock, the incumbent can make entry unprofitable. We analyze the conditions under which the incumbent firm would deter entry and when entry would be allowed. Further, we analyze the effect that potential entry has on the harvest rate both before and after the date of potential entry and whether or not potential entry is welfare improving.