Cannibalisation occurs when a company reduces the sales of one of its products by introducing a similar, competing product in the same market.

Igami and Yang study this phenomenon in relation to burger outlets, pointing out that entry of new outlets harms the profitability of existing stores (cannibalisation) but that this occurs so as to preempt the threat of rivals’ entry: i.e. a firm may have an incentive to cannibalise its market share if it thinks this will keep rivals out (by saturating the market and depriving it of store locations).

One of their main findings is that “shops of the same chains compete more intensely with each other than with shops of different chains, which implies cannibalization is one of the most important considerations for the firms’ entry decisions”. [...]