Stackelberg Leadership with Product Differentiation and Endogenous Entry: Some Comparative Static and Limiting Results
AbstractAllowing for endogenous entry in the traditional Stackelberg setup with product differentiation, leads to reverting of the standard comparative static and limiting results. Unlike in the standard Stackelberg setup with barriers to entry, the leader's profit increases when the differentiation becomes lower. The reason is that competition becomes tougher when products become more alike, and consequently, fewer firms enter in equilibrium. On the other hand, increasing product differentiation towards its limit results in number of entrants tending to infinity and for very large market, the profit of the leader approaches zero. Thus market structure approaches monopolistic competition, rather than the standard monopoly outcome that occurs with exogenous number of followers.
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Date of creation: Oct 2008
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Stackelberg leadership; product differentiation; endogenous entry.;
Other versions of this item:
- Krešimir Žigić, 2012. "Stackelberg leadership with product differentiation and endogenous entry: some comparative static and limiting results," Journal of Economics, Springer, vol. 106(3), pages 221-232, July.
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-01-10 (All new papers)
- NEP-BEC-2009-01-10 (Business Economics)
- NEP-COM-2009-01-10 (Industrial Competition)
- NEP-IND-2009-01-10 (Industrial Organization)
- NEP-MIC-2009-01-10 (Microeconomics)
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.:
- Federico Etro, 2008.
"Stackelberg Competition with Endogenous Entry,"
Royal Economic Society, vol. 118(532), pages 1670-1697, October.
- Federico Etro, 2004. "Innovation by leaders," Economic Journal, Royal Economic Society, vol. 114(495), pages 281-303, 04.
- Federico Etro, 2006. "Market Leaders and Industrial Policy," Working Papers 103, University of Milano-Bicocca, Department of Economics, revised Nov 2006.
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