'Delayed Forbearance': Multipoint contact and mutual forbearance in inaugural and subsequent competitive actions

Abstract

One strand of theoretical development in the multimarket competition literature examines whether mutual forbearance applies uniformly to all types of competitive actions. For example, scholars have shown that mutual forbearance takes effect for exploitation, but not exploration-based actions. Extending this line of research, we study how the dominance of mutual forbearance also differs across inaugural and subsequent competitive actions. The key difference between the two lies in the identity of the initiator – inaugural actions are by firms new to the market domain, and subsequent ones are by existing incumbents. We argue that mutual forbearance has a delayed dominance for subsequent competitive actions (relative to inaugural ones), propose moderating conditions, and test our predictions using product launch decisions of automobile firms in the US between 1980 and 2015. Show more