Optimal entry deterrence under uncertainty

The objective of this paper is to analyze an incumbent-entrant model under uncertainty. The entrant observes the realization of the random variable(s) prior to making decisions regarding market entry and capacity selection, leaving the uncertainty entirely on the incumbent's side. The sources of this uncertainty pertain to the characteristics of the entrant's product and the entry costs the entrant must incur before becoming operational. The key findings indicate that uncertainty generally enhances entry, and, apart from blockaded entry, entry deterrence and accommodated entry, the incumbent can pursue entry deterrence with a certain probability.