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Strategic delay in market entry

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  • Hikmet Gunay

Abstract

Two firms are contemplating entry into a market that is viable for only one firm in a good state. We show that even if each firm receives a signal that perfectly reveals a good state, both might strategically delay entry, owing to the fear that the other firm might enter in the same period as well. We also find the conditions where the informed firm will let the rival firm know about the market's profitability and the two will merge to enter the market. We discuss the applications of this model to the oil industry and the generic drug industry.

Suggested Citation

  • Hikmet Gunay, 2008. "Strategic delay in market entry," Canadian Journal of Economics, Canadian Economics Association, vol. 41(3), pages 998-1014, August.
    • Handle: RePEc:cje:issued:v:41:y:2008:i:3:p:998-1014
    DOI: 10.1111/j.1540-5982.2008.00494.x
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    Cited by:

    1. Çolak, Gönül & Günay, Hikmet, 2011. "Strategic waiting in the IPO markets," Journal of Corporate Finance, Elsevier, vol. 17(3), pages 555-583, June.

    More about this item

    JEL classification:

    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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