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Imperfect competition, integer constraints and industry dynamics

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  • AMIR, Rabah
  • LAMBSON, Val E.

Abstract

Amir and Lambson (2003) developed an infinite-horizon, stochastic model of entry and exit by integer numbers of firms facing sunk costs and uncertain market conditions. Here, as examples of the model' usefulness, special cases are applied to the following three s issues: (1) the relationship between sunk costs and industry concentration, (2) entry when current profits are negative, and (3) the relationship between entry and the length of the product cycle.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2004042.

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Date of creation: 00 Jun 2004
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Handle: RePEc:cor:louvco:2004042

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Keywords: entry and exit; dynamic games; integer constraints;

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  1. Rabah Amir & Val E. Lambson, 1998. "On the Effects of Entry in Cournot Markets," CIE Discussion Papers 1998-06, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
  2. David Besanko & Ulrich Doraszelski, 2004. "Capacity Dynamics and Endogenous Asymmetries in Firm Size," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 23-49, Spring.
  3. Lambson, Val Eugene, 1987. "Is the Concentration-Profit Correlation Partly an Artifact of Lumpy Technology?," American Economic Review, American Economic Association, vol. 77(4), pages 731-33, September.
  4. Dixit, Avinash K, 1989. "Entry and Exit Decisions under Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 620-38, June.
  5. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-96, March.
  6. Agarwal, Rajshree & Gort, Michael, 1996. "The Evolution of Markets and Entry, Exit and Survival of Firms," The Review of Economics and Statistics, MIT Press, vol. 78(3), pages 489-98, August.
  7. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 53-82, January.
  8. Simon P. Anderson & Maxim Engers, 2001. "Preemptive entry in differentiated product markets," Economic Theory, Springer, vol. 17(2), pages 419-445.
  9. B. Douglas Bernheim, 1984. "Strategic Deterrence of Sequential Entry into an Industry," RAND Journal of Economics, The RAND Corporation, vol. 15(1), pages 1-11, Spring.
  10. Lambson, Val Eugene, 1992. "Competitive Profits in the Long Run," Review of Economic Studies, Wiley Blackwell, vol. 59(1), pages 125-42, January.
  11. Abreu, Dilip, 1986. "Extremal equilibria of oligopolistic supergames," Journal of Economic Theory, Elsevier, vol. 39(1), pages 191-225, June.
  12. AMIR, Rabah & LAMBSON, Val, 2003. "Entry, exit, and imperfect competition in the long run," CORE Discussion Papers 2003066, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  13. Fudenberg, Drew & Tirole, Jean, 1987. "Understanding Rent Dissipation: On the Use of Game Theory in Industrial Organization," American Economic Review, American Economic Association, vol. 77(2), pages 176-83, May.
  14. Klepper, Steven & Simons, Kenneth L., 2005. "Industry shakeouts and technological change," International Journal of Industrial Organization, Elsevier, vol. 23(1-2), pages 23-43, February.
  15. N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring.
  16. La Manna, Manfredi M. A., 1986. "Why are profits correlated with concentration?," Economics Letters, Elsevier, vol. 22(1), pages 81-85.
  17. repec:att:wimass:8904 is not listed on IDEAS
  18. John Londregan, 1990. "Entry and Exit over the Industry Life Cycle," RAND Journal of Economics, The RAND Corporation, vol. 21(3), pages 446-458, Autumn.
  19. Ulrich Doraszelski & Mark Satterthwaite, 2003. "Foundations of Markov-Perfect Industry Dynamics. Existence, Purification, and Multiplicity," Discussion Papers 1383, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  20. Dewey, Donald, 1976. "Industrial Concentration and the Rate of Profit: Some Neglected Theory," Journal of Law and Economics, University of Chicago Press, vol. 19(1), pages 67-78, April.
  21. Eaton, B Curtis & Lipsey, Richard G, 1979. "The Theory of Market Pre-emption: The Persistence of Excess Capacity and Monopoly in Growing Spatial Markets," Economica, London School of Economics and Political Science, vol. 46(182), pages 149-58, May.
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