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Using Evolutionary Game Theory to Deter Competitor Market Entry

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Companies that innovate lead the market but often attract market chasers that seek to gain financial benefits of producing similar products. For organizations that have invented new products and services this can be an annoying aspect of doing business if high profits must now be shared with other market entry companies. To avoid easy access by competitors a company may desire to use a deterrence or shakeout strategy. A study in the Journal of Academy of Marketing Science discusses how evolutionary game theory is used to understand whether a deterrence strategy and a shakeout strategy are more successful in keeping new businesses of out the market (Homburg, et. al, 2013). The method a company uses will determine whether or not they will be effective in ensure the costs are too high for other firms to pursue. A deterrence strategy seeks to block potential competitors from entering the market. Strategies may include limit pricing, raising switching costs, new innovations