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Strategic Investment and Timing of Entry

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Author Info
Anderson, Simon P
Engers, Maxim

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Abstract

The authors introduce competition over entry time into a sequential output choice model to show how profit differences will be dissipated. This resolves a problem in the standard Stackelberg model that the order of moves is exogenously specified yet an earlier position in the order is usually preferred to a later one. If capacity costs are not too low, the authors' solution applies even if firms cannot commit to sell their entire output. Introducing positive capacity costs slightly modifies the static Stackelberg results since endogenous cost asymmetries arise. The framework, therefore, partially rehabilitates the Stackelberg model. Copyright 1994 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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Publisher Info
Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 35 (1994)
Issue (Month): 4 (November)
Pages: 833-53
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Handle: RePEc:ier:iecrev:v:35:y:1994:i:4:p:833-53

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  1. L. Lambertini, 2009. "Oligopoly with Hyperbolic Demand and Capital Accumulation," Working Papers 672, Dipartimento Scienze Economiche, Universita' di Bologna. [Downloadable!]
  2. Federico Etro, 2007. "Stackelberg competition with endogenous entry," Working Papers 121, University of Milano-Bicocca, Department of Economics, revised 2007. [Downloadable!]
    Other versions:
  3. Richard Arend, 2009. "Defending against rival innovation," Small Business Economics, Springer, vol. 33(2), pages 189-206, August. [Downloadable!] (restricted)
  4. R. Cellini & L. Lambertini, 2000. "Non-Linear Marcket Demand and Capital Accumulation in A Differential Oligopoly Game," Working Papers 372, Dipartimento Scienze Economiche, Universita' di Bologna. [Downloadable!]
  5. Attila Tasnádi, 2009. "Quantity-setting games with a dominant firm," EERI Research Paper Series EERI_RP_2009_25, Economics and Econometrics Research Institute (EERI). [Downloadable!]
    Other versions:
  6. Luca Colombo & Paola Labrecciosa, 2008. "When Stackelberg and Cournot Equilibria Coincide," The B.E. Journal of Theoretical Economics, Berkeley Electronic Press, vol. 8(1). [Downloadable!]
  7. Bruno Versaevel, 2009. "Cumulative Leadership and Entry Dynamics," Post-Print halshs-00371847_v1, HAL. [Downloadable!]
    Other versions:
  8. Bergman, Mats A., 1998. "Endogenous Timing of Investments Yields Modified Stackelberg Outcomes," Working Paper Series in Economics and Finance 272, Stockholm School of Economics. [Downloadable!]
  9. Eric Rasmusen & Young-Ro Yoon, 2008. "First versus Second-Mover Advantage with Information Asymmetry about the Size of New Markets," Working Papers 2008-15, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
    Other versions:
  10. Simon P. Anderson & Maxim Engers, . "Preemptive Entry in Differentiated Product Markets," Virginia Economics Online Papers 334, University of Virginia, Department of Economics. [Downloadable!]
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