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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Ludwig, Sandra / Schmitz, Hendrik

Ed. by Barigozzi, Francesca / Brunner, Johann / Fleck, Robert / Jürges, Hendrik / Mastrobuoni, Giovanni / Mendola, Mariapia / Requate, Till / de Vries, Frans / Wenzel, Tobias

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Investment in Green Technology and Entry Deterrence

John C. Strandholm
  • Johnson College of Business and Economics, University of South Carolina Upstate, 160 East St John St, Spartanburg, SC 29306, USA
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/ Ana Espínola-Arredondo
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  • School of Economic Sciences, Washington State University, 111C Hulbert Hall, Pullman, WA 99164, USA
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Published Online: 2020-02-01 | DOI: https://doi.org/10.1515/bejeap-2018-0355


This paper analyzes an entry-deterrence model in which the incumbent decides whether to invest in research and development (R&D) that promotes clean technology. We consider the case in which the entrant could benefit from a technology spillover and analyze the conditions that facilitate the incumbent’s entry-deterrence behavior. We show that higher levels of the spillover make entry more attractive compared to a standard entry game. In addition, regulator and incumbent prefer entry when the spillover from clean technology is sufficiently high and the cost of investing in R&D is relatively low. However, preferences are misaligned when the spillover and cost of R&D are low.

Keywords: entry deterrence; emission fee; research and development; spillover

JEL Classification: H23; L12; O32; Q58


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Published Online: 2020-02-01

Citation Information: The B.E. Journal of Economic Analysis & Policy, 20180355, ISSN (Online) 1935-1682, DOI: https://doi.org/10.1515/bejeap-2018-0355.

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