This paper describes work on a dynamic model of entry deterrence appli
ed to the UK National Health Service (NHS) market for pathology servic
es. The model, based on a game theoretical framework, is concerned wit
h decision support applications. Presented in this paper is a case stu
dy analysis of a geographical region in which a provider of pathology
services is concerned at the prospect of being exposed to competition
from a new entrant, The incumbent provider may undertake strategic inv
estments to create a stock of knowledge and goodwill with the intentio
n of dissuading others from entering the market. The effect of a new e
ntrant is modelled as perturbation of a pre-existing stable Nash-Courn
ot equilibrium in an oligopolistic market, and is influenced by market
forces subject to Government regulation. The original contribution of
this study is to identify the nature of these potential strategic inv
estments and their interaction with cash Bows. Recent historical data
and managerial analysis are used to characterise market growth. An est
imate of the incumbent provider's market share which is at risk can be
found by examining the local geographical distribution of providers a
nd purchasers of pathology services. On the basis of this analysis we
propose a method for obtaining the strategic investment profile which
minimises the total investment required to deter entry. (C) 1998 Elsev
ier Science B.V.