ENTRY DETERRENCE IN THE COMMONS

We analyze a common property resource model with a single incumbent fi rm that faces future potential entry of a rival. The cost of harvest f rom the resource is a function of the stock size. By drawing down curr ent stock sufficiently, which lowers future stock, the incumbent can m ake entry unprofitable. We analyze the conditions under which the incu mbent firm would deter entry and when entry would be allowed. Further, we analyze the effect that potential entry has on the harvest rate bo th before and after the date of potential entry and whether or not pot ential entry is welfare improving.