This paper takes the dominant firm in complete monopoly market who deters a new entrant to enter as the basic problem，given the complete reformation, by the comparative analysis of the Stackelberg equilibrium which perm its entry and the credibility threat strategy behavior of excess capacity which deters entry, proved the reason of the existence of the excess capacity, explained that the firm who rationally chose excess capacity is a relative steady statement. The dominant firm makes the threats to the new entrants credible b y investing excess capacity, and thereby can deter entry. The result of this paper shows that holding the excess capacity is a rational choice for firms under certain conditions, and it is determined by the special technology and market conditions.

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