In dynamic entry-and-exit models, common understanding is that potential entrants will enter into the market up to the point where all excess profits are eroded. Dominant incumbent positions are possible only under specific circumstances, such as the presence of substantial barriers to entry, or when incumbents can credibly threaten to punish rivals with losses upon entry. In this paper, we report on an equilibrium with market dominance that exists in a simple two-firm model that features neither entry barriers nor punishment strategies. this equilibrium induces an alternating monopoly - despite the fact that the model also sustains a Cournot duopoly. Even when initially both firms are active in the market, an alternating monopoly reveals itself rather quickly. Moreover, the alternating monopoly equilibrium Pareto dominates the Cournot equilibrium - as it is close to the cartel outcom.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization in its series Research Memoranda with number
011.
References listed on IDEAS 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.:
Did you know? You can include your works in the database easily by uploading them on the Munich Personal RePEc Archive (MPRA) if you do not have access to an institutional RePEc archive.