Oligopoly Limit Pricing - Strategic Substitutes, Strategic Complements

Conditions are outlined under which it is a sequential equilibrium for firms to forgo current profit to reduce the likelihood of entry, if firms are uncertain about rivals' costs. The assumptions about out-of-equilibrium beliefs that sustain such equilibria are more plausible if firms produce strategic substitutes than if firms produce strategic complements.The article is a published version of EUI ECO WP; 1994/1