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Endogenous timing with infinitely many firms

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  • Tesoriere, Antonio
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    Abstract

    A model with constant marginal costs is considered where firms choose first a period for production and then the amount to produce when competing in the market according to the resulting timing decisions. Multiple equilibria arise allowing for infinitely many industry output configurations encompassing one limit-output dominant firm and the Cournot equilibrium with free entry as extreme cases. At each of these equilibria a firm produces a positive amount only if this firm commits to produce at period one. Both Stackelberg and Cournot-like outcomes are sustainable as equilibria however. When the number of leaders is given, production at subsequent periods is always prevented, and industry output is sometimes larger than the entry preventing level.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Journal of Industrial Organization.

    Volume (Year): 26 (2008)
    Issue (Month): 6 (November)
    Pages: 1381-1388

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    Handle: RePEc:eee:indorg:v:26:y:2008:i:6:p:1381-1388

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    Web page: http://www.elsevier.com/locate/inca/505551

    Related research

    Keywords: Endogenous timing Market leadership Entry prevention;

    References

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    1. Michael Waldman, 1985. "Noncooperative Entry Deterrence, Uncertainty, and the Free Rider Problem," UCLA Economics Working Papers 364, UCLA Department of Economics.
    2. Hamilton, J.H. & Slutsky, S.M., 1988. "Endogenous Timing In Duopoly Games: Stackelberg Or Cournot Equilibria," Papers 88-4, Florida - College of Business Administration.
    3. AMIR, Rabah & LAMBSON, Val, 1999. "On the effects of entry in Cournot markets," CORE Discussion Papers 1999059, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Federico Etro, 2008. "Stackelberg Competition with Endogenous Entry," Economic Journal, Royal Economic Society, vol. 118(532), pages 1670-1697, October.
    5. Matsumura, Toshihiro, 1999. "Quantity-setting oligopoly with endogenous sequencing," International Journal of Industrial Organization, Elsevier, vol. 17(2), pages 289-296, February.
    6. N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring.
    7. Huck, Steffen & Muller, Wieland & Normann, Hans-Theo, 2002. "To Commit or Not to Commit: Endogenous Timing in Experimental Duopoly Markets," Games and Economic Behavior, Elsevier, vol. 38(2), pages 240-264, February.
    8. Anderson, Simon P. & Engers, Maxim, 1992. "Stackelberg versus Cournot oligopoly equilibrium," International Journal of Industrial Organization, Elsevier, vol. 10(1), pages 127-135, March.
    9. AMIR, Rabah & STEPANOVA, Anna, 2004. "Second-mover advantage and price leadership in Bertrand duopoly," CORE Discussion Papers 2004037, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    10. Edward C. Prescott & Michael Visscher, 1977. "Sequential Location among Firms with Foresight," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 378-393, Autumn.
    11. Vives, Xavier, 1988. "Sequential entry, industry structure and welfare," European Economic Review, Elsevier, vol. 32(8), pages 1671-1687, October.
    12. B. Douglas Bernheim, 1984. "Strategic Deterrence of Sequential Entry into an Industry," RAND Journal of Economics, The RAND Corporation, vol. 15(1), pages 1-11, Spring.
    13. Gilbert, Richard & Vives, Xavier, 1986. "Entry Deterrence and the Free Rider Problem," Review of Economic Studies, Wiley Blackwell, vol. 53(1), pages 71-83, January.
    14. Gal-Or, Esther, 1985. "First Mover and Second Mover Advantages," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 649-53, October.
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    Cited by:
    1. Tasnádi, Attila, 2009. "Quantity-setting games with a dominant firm," MPRA Paper 13612, University Library of Munich, Germany.
    2. Etro, Federico, 2011. "Endogenous market structures and contract theory: Delegation, principal-agent contracts, screening, franchising and tying," European Economic Review, Elsevier, vol. 55(4), pages 463-479, May.
    3. Federico Etro, 2010. "Endogenous market structures and antitrust policy," International Review of Economics, Springer, vol. 57(1), pages 9-45, March.

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