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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. Federico Etro, 2007. "Stackelberg competition with endogenous entry," Working Papers 121, University of Milano-Bicocca, Department of Economics, revised 2007.
    2. Vives, Xavier, 1988. "Sequential entry, industry structure and welfare," European Economic Review, Elsevier, vol. 32(8), pages 1671-1687, October.
    3. Rabah Amir & Anna Stepanova, 2000. "Second-Mover Advantage and Price Leadership in Bertrand Duopoly," CIE Discussion Papers 2000-10, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
    4. Rabah Amir, 2000. "On the Effects of Entry in Cournot Markets," Econometric Society World Congress 2000 Contributed Papers 1475, Econometric Society.
    5. Michael Waldman, 1985. "Noncooperative Entry Deterrence, Uncertainty, and the Free Rider Problem," UCLA Economics Working Papers 364, UCLA Department of Economics.
    6. Anderson, Simon P. & Engers, Maxim, 1992. "Stackelberg versus Cournot oligopoly equilibrium," International Journal of Industrial Organization, Elsevier, vol. 10(1), pages 127-135, March.
    7. Matsumura, Toshihiro, 1999. "Quantity-setting oligopoly with endogenous sequencing," International Journal of Industrial Organization, Elsevier, vol. 17(2), pages 289-296, February.
    8. 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.
    9. 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.
    10. 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.
    11. 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.
    12. 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.
    13. Hamilton, J.H. & Slutsky, S.M., 1988. "Endogenous Timing In Duopoly Games: Stackelberg Or Cournot Equilibria," Papers 88-4, Florida - College of Business Administration.
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    Cited by:
    1. Etro Federico, 2010. "Endogenous Market Structures and Contract Theory. Delegation, principal-agent contracts, screening, franchising and tying," Working Papers 2010_25, Department of Economics, University of Venice "Ca' Foscari".
    2. Attila Tasnádi, 2009. "Quantity-setting games with a dominant firm," EERI Research Paper Series EERI_RP_2009_25, Economics and Econometrics Research Institute (EERI), Brussels.
    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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