As noted in a recent survey, dominance is a power relation between two agents in which the dominator restricts the actions of the dominated. But the dominant firm of limit price models in quite restricted in its actions toward actual or potential fringe rivals.
The dominant firm has one weapon with which it can affect their decisions: its output level, which influences the price that rivals think, will hold after entry or expansion. From the point of view of the dominant firm, this is not Read More
In 1960, olin and pennsalt formed a joint venture the Penn – olin chemical company for the production of sodium chlorate. Each parent firm owned 60 per cent of the offspring’s stock in 1961, Penn – olin began operating a new plant in Calvert city, Kentucky. The plant had a capacity of 26,500 tons per year. Discussion: as this incident shows a decision on entry of or expansion involves a careful consideration of market conditions, including they likely reactions of firms already in that market and of other potential entrants. It is often the case – as here – that the most likely entrants are firms that already operate in related product or geographic markets. 
