In deciding whether to invest in excess capacity in order to deter entry,incumbents should consider all of the following except
A) the order of play in pricing and capacity choice decisions
B) the customer sorting pattern
C) the sunk cost required to achieve excess capacity
D) the joint-profit-maximizing cartel output
E) the potential entrant's projected profitability

Question

Quizplus · Accepted Answer

The joint-profit-maximizing cartel output is not relevant to an individual firm's decision-making process regarding excess capacity investment. The other options are all factors that an incumbent should consider before making a decision.

In Deciding Whether to Invest in Excess Capacity in Order