Strategic delay in market entry
AbstractTwo firms are contemplating entry into a market that is viable for only one firm in a good state. We show that even if each firm receives a signal that perfectly reveals a good state, both might strategically delay entry, owing to the fear that the other firm might enter in the same period as well. We also find the conditions where the informed firm will let the rival firm know about the market's profitability and the two will merge to enter the market. We discuss the applications of this model to the oil industry and the generic drug industry.
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Bibliographic InfoArticle provided by Canadian Economics Association in its journal Canadian Journal of Economics.
Volume (Year): 41 (2008)
Issue (Month): 3 (August)
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Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
Web page: http://economics.ca/cje/
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- L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
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- Ã‡olak, GÃ¶nÃ¼l & GÃ¼nay, Hikmet, 2011. "Strategic waiting in the IPO markets," Journal of Corporate Finance, Elsevier, Elsevier, vol. 17(3), pages 555-583, June.
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