Advanced Search
MyIDEAS: Login to save this article or follow this journal

Inefficient entry order in preemption games

Contents:

Author Info

  • Argenziano, Rossella
  • Schmidt-Dengler, Philipp

Abstract

In a preemption game, players decide when to take an irreversible action. Delaying the action exogenously increases payoffs, but there is an early mover advantage. Riordan (1992) shows that in a preemption game with two asymmetric players, players act in decreasing order of efficiency. This provides a microfoundation to the assumption that entry in a market occurs in the order of profitability, commonly used in the empirical analysis of market entry. We provide a counterexample showing that with more than two players this intuitive result can be reversed. We present a preemption game of entry into a new market. The potential entrants are three asymmetric firms: one “efficient” firm with high post-entry profits, and two “inefficient firms”. We show that the set of parameters such that the equilibrium entry order does not reflect the efficiency ranking is nonempty, and analyse which changes in post-entry profits preserve this entry order.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/pii/S0304406812000626
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 48 (2012)
Issue (Month): 6 ()
Pages: 445-460

as in new window
Handle: RePEc:eee:mateco:v:48:y:2012:i:6:p:445-460

Contact details of provider:
Web page: http://www.elsevier.com/locate/jmateco

Related research

Keywords: Timing games; Preemption; Dynamic entry;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Mason, Robin & Weeds, Helen, 2010. "Investment, uncertainty and pre-emption," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 28(3), pages 278-287, May.
  2. Pawlina, G. & Kort, P.M., 2001. "Real Options in an Aymmetric Duopoly: Who Benefits from your Competitive Disadvantage," Discussion Paper, Tilburg University, Center for Economic Research 2001-95, Tilburg University, Center for Economic Research.
  3. Simon, Leo K & Stinchcombe, Maxwell B, 1989. "Extensive Form Games in Continuous Time: Pure Strategies," Econometrica, Econometric Society, Econometric Society, vol. 57(5), pages 1171-1214, September.
  4. Prajit K. Dutta & Saul Lach & Aldo Rustichini, 1993. "Better Late Than Early: Vertical Differentiation in the Adoption of a New Technology," NBER Working Papers 4473, National Bureau of Economic Research, Inc.
  5. Luis C. Corchon, 2006. "Welfare losses under cournot competition," Economics Working Papers, Universidad Carlos III, Departamento de Economía we063910, Universidad Carlos III, Departamento de Economía.
  6. Bouis, Romain & Huisman, Kuno & Kort, Peter M., 2009. "Investment in oligopoly under uncertainty: The accordion effect," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/12655, Paris Dauphine University.
  7. Gianluca Femminis & Gianmaria Martini, 2008. "Irreversible R&D investment with inter-firm spillovers," DISCE - Quaderni dell'Istituto di Teoria Economica e Metodi Quantitativi, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE) compila la segreteria, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  8. Berry, Steven T, 1992. "Estimation of a Model of Entry in the Airline Industry," Econometrica, Econometric Society, Econometric Society, vol. 60(4), pages 889-917, July.
  9. Fudenberg, Drew & Tirole, Jean, 1985. "Preemption and Rent Equilization in the Adoption of New Technology," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 52(3), pages 383-401, July.
  10. Quint, Daniel & Einav, Liran, 2005. "Efficient entry," Economics Letters, Elsevier, Elsevier, vol. 88(2), pages 278-283, August.
  11. Hoppe, Heidrun C. & Lehmann-Grube, Ulrich, 2005. "Innovation timing games: a general framework with applications," Journal of Economic Theory, Elsevier, Elsevier, vol. 121(1), pages 30-50, March.
  12. Heidrun C. Hoppe & Ulrich Lehmann-Grube, 2001. "Second-Mover Advantages in Dynamic Quality Competition," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 10(3), pages 419-433, 09.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Smirnov, Vladimir & Wait, Andrew, 2013. "Innovation in a generalized timing game," Working Papers, University of Sydney, School of Economics 2013-16, University of Sydney, School of Economics.
  2. Argenziano, Rossella & Schmidt-Dengler, Philipp, 2013. "Competition, timing of entry and welfare in a preemption game," Economics Letters, Elsevier, Elsevier, vol. 120(3), pages 509-512.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:mateco:v:48:y:2012:i:6:p:445-460. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.