We analyze entry, pricing, and product design in a model with differentiated products. Market equilibrium ran be "separating," with multiple sellers and a .sorting of heterogeneous consumers across goods, or "exclusionary" with one seller serving allcustomer types. Entry into an initially monopolized market can occur because of cost reductions or product improvements, but entry need not lower die incumbent's price, improve efficiency, or raise consumer welfare. Post-entry design incentives favor a softening of price competition and stronger market segmentation, whereas exclusionary design changes typically raise consumer welfare. Potential, as distinct from actual, entry always benefits consumers.
展开▼
