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Rent Dissipation in Repeated Entry Games: Some New Results

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  • Jean-Pierre Ponssard

Abstract

Two-player infinitely-repeated-entry games are revisited using a new Markov equilibrium concept. The idea is to have an incumbent facing a hit and run entrant. Rent dissipation no longer necessarily holds. It will not when competition is tough in case of entry. Similarities and differences with previous approaches are analyzed. Several economic illustrations are discussed.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2004/wp-cesifo-2004-05/cesifo1_wp1186.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1186.

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Date of creation: 2004
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Handle: RePEc:ces:ceswps:_1186

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Keywords: rent dissipation; Markov equilibria; hit and run;

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  1. Marcel Boyer & Pierre Lasserre & Thomas Mariotti & Michel Moreaux, 2001. "Preemption and Rent Dissipation under Bertrand Competition," Cahiers de recherche du Département des sciences économiques, UQAM, Université du Québec à Montréal, Département des sciences économiques 20-04, Université du Québec à Montréal, Département des sciences économiques.
  2. Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 13(4), pages 421-440, December.
  3. Wilson, Robert, 1992. "Strategic models of entry deterrence," Handbook of Game Theory with Economic Applications, Elsevier, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 10, pages 305-329 Elsevier.
  4. Brock, William A, 1983. "Contestable Markets and the Theory of Industry Structure: A Review Article," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 91(6), pages 1055-66, December.
  5. Farrell, Joseph, 1986. "How effective is potential competition?," Economics Letters, Elsevier, Elsevier, vol. 20(1), pages 67-70.
  6. Eric Maskin & Jean Tirole, 2010. "A Theory of Dynamic Oligopoly, 1: Overview and Quantity Competition with Large Fixed Costs," Levine's Working Paper Archive 397, David K. Levine.
  7. Dixit, Avinash, 1979. "The Role of Investment in Entry-Deterrence," The Warwick Economics Research Paper Series (TWERPS), University of Warwick, Department of Economics 140, University of Warwick, Department of Economics.
  8. Ponssard, Jean-Pierre, 1991. "Forward induction and sunk costs give average cost pricing," Games and Economic Behavior, Elsevier, Elsevier, vol. 3(2), pages 221-236, May.
  9. Spence, Michael, 1983. "Contestable Markets and the Theory of Industry Structure: A Review Article," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 21(3), pages 981-90, September.
  10. Gromb, Denis & Ponssard, Jean-Pierre & Sevy, David, 1997. "Selection in Dynamic Entry Games," Games and Economic Behavior, Elsevier, Elsevier, vol. 21(1-2), pages 62-84, October.
  11. Lahmandi-Ayed, Rim & Ponssard, Jean-Pierre & Sevy, David, 1996. "Efficiency of dynamic quantity competition: A remark on Markovian equilibria," Economics Letters, Elsevier, Elsevier, vol. 50(2), pages 213-221, February.
  12. Fudenberg, Drew & Tirole, Jean, 1987. "Understanding Rent Dissipation: On the Use of Game Theory in Industrial Organization," American Economic Review, American Economic Association, American Economic Association, vol. 77(2), pages 176-83, May.
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