Response to Competitive Entry: A Rationale for Delayed Defensive Reaction

Empirical studies examining responses to new product entries come to the puzzling conclusion that, in general, an incumbent reacts to a new entrant after a significant delay. Even easy-to-implement price cuts are observed after significant lag following entry. These findings seem to contradict the existing literature that either implicitly assumes or strongly advocates immediate defensive responses to limit competitive encroachment. When a...