Figure 5
The horizontal axis is labeled “X”. The horizontal axis shows four marked points labeled from left to right: “X underline subscript D comma L”, “X hat subscript D”, “X hat subscript A”, and “X underline subscript D comma H”. The vertical axis shows two marked values labeled “R hat” and “R bar”. “R hat” is positioned above “R bar”. Three main curves are shown. A bold concave down curve labeled “pi subscript D” starts high on the vertical axis, increases to reach a peak above “X hat subscript D”, and then declines sharply toward the horizontal axis. A lighter concave down curve labeled “pi subscript A” rises from near “R bar” on the vertical axis, peaks near “X hat subscript A”, and then declines. A third curve labeled “pi subscript y” starts near “R bar” on the vertical axis, increases linearly to a peak between “X hat subscript A” and “X underline subscript D comma H”, and then slopes downward to the right. A fourth curve labeled “pi subscript x” starts near “R bar” on the vertical axis and decreases concave up toward the horizontal axis. Vertical dashed lines extend upward from the horizontal axis at “X underline subscript D comma L”, “X hat subscript D”, “X hat subscript A”, and “X underline subscript D comma H”. A horizontal dashed line from the vertical axis at “R hat” extends rightward and intersects the third curve when it is increasing. Another horizontal dashed line from the vertical axis where the bold curve begins and extends rightward to intersect the peak of the lighter curve. Text on the right defines three regions: “0 less than or equal to R less than R bar: entry is accommodated open parenthesis X equals X hat subscript A close parenthesis”. “R bar less than or equal to R less than R hat: entry is deterred open parenthesis X underline subscript D comma L less than or equal to X less than X hat subscript D close parenthesis”. “R hat less than or equal to R: entry is blocked open parenthesis X equals X hat subscript D close parenthesis”.Incumbent’s optimal strategy under threat of entry by low cross-resistance differentiated rival. Source(s): Figure by author