Khachatryan, Rubik and Lukyanov, Georgy (2026) Reputation, Disclosure, and the Scope of Entry. TSE Working Paper, n. 26-1788, Toulouse

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Abstract

This paper studies how learning about an incumbent affects the scope of entry when competitive responses use resources shared across markets. An entrant chooses whether to launch in neither, one, or both of two markets. Entry into the second market reduces the incumbent’s cost-reducing response in the first and can make one-market entry unattractive. The entrant learns about the incumbent’s capability from a record of its response to an earlier rival. More frequent publication encourages a less capable incumbent to imitate a more capable one. An observed response then becomes less informative, and entry after that record expands. We compare publication of conduct with a public audit of capability. For an open set of parameters with uniform setup costs, full publication maximizes total surplus within the specified policy class when publication costs are low. Removing the interaction between response costs across markets reverses this choice, while preserving all early and singleton-market payoffs. A capability audit is dominated in both economies. Expected entry scope is constant across the considered policies within each technology, although productive investment and the allocation of entry change.