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Efficient Entry in Cournot (Global) games

Author

Listed:
  • Harrison, Rodrigo
  • Jara-Moroni, Pedro

    (Universidad de Santiago de Chile.Facultad de Administración y Economía.Departamento de Economía
    Universidad Adolfo Ibáñez. Facultad de Ingeniería y Ciencias)

Abstract

IWe present a two stage entry game in which a large number of firms choose simultaneouslywhether to enter a market or not. Firms that decide to enter the market produce a homogeneousgood facing Cournot competition under a parametrized demand. Using a global game approach, weshow that there exist selection of a unique equilibrium in the first stage entry game, in which thereis efficient entry, i.e. firms that enter are the ones with the lowest entry cost, providing theoreticalfoundation for the equilibrium selection assumption utilized in entry models in the empirical entryliterature. We explore as well efficiency properties of the selected equilibrium and provide examplesthat do not fit our general framework, but where similar results may be obtained.

Suggested Citation

  • Harrison, Rodrigo & Jara-Moroni, Pedro, 2021. "Efficient Entry in Cournot (Global) games," FAE-USACH Working Papers Series 991944255606116, Facultad de Administración y Economía. Universidad de Santiago de Chile.
    • Handle: RePEc:ars:papers:991944255606116
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    More about this item

    Keywords

    Cournot; Global game; Equilibrium selection; Strategic substitutes;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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