This paper explores the strategic properties of pricing rules. We show
that spatial price discrimination may be used for entry deterrence pu
rposes, while f.o.b. pricing policies are better to accommodate entry,
Commitment to a pricing policy changes the form of competition in the
post-entry game. Discriminatory pricing makes the incumbent 'tough' w
hereas f,o.b, makes the incumbent 'soft' and is the optimal policy whe
n entry has to be accommodated. When there is no commitment to a prici
ng policy, under asymmetric information, the existing firm may use del
ivered pricing policies to deter entry, (C) 1998 Elsevier Science B.V.