IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-04l10008.html
   My bibliography  Save this article

Industry sunk costs and entry dynamics

Author

Listed:
  • Andrew Wait

    () (University of Sydney)

  • Vladimir Smirnov

    () (University of Sydney)

Abstract

We explore an investment game where industry sunk costs provide anincentive for a firm to be a follower into the market as opposedto a leader. For some parameter values, every firm could have adominant strategy to wait, even though immediate entry is sociallyoptimal - this is a like prisoners' dilemma. In equilibrium, afirm is more likely to have a dominant strategy to wait with anincrease in the number of potential entrants. Finally, theequilibrium can display an entry cascade.

Suggested Citation

  • Andrew Wait & Vladimir Smirnov, 2004. "Industry sunk costs and entry dynamics," Economics Bulletin, AccessEcon, vol. 12(4), pages 1-7.
  • Handle: RePEc:ebl:ecbull:eb-04l10008
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/pubs/EB/2004/Volume12/EB-04L10008A.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Hamilton, Jonathan H. & Slutsky, Steven M., 1990. "Endogenous timing in duopoly games: Stackelberg or cournot equilibria," Games and Economic Behavior, Elsevier, vol. 2(1), pages 29-46, March.
    2. Klaus Stegemann, 2000. "The Integration of Intellectual Property Rights into the WTO System," The World Economy, Wiley Blackwell, vol. 23(9), pages 1237-1267, September.
    3. Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 421-440, December.
    4. Kaplan, Todd R. & Luski, Israel & Wettstein, David, 2003. "Innovative activity and sunk cost," International Journal of Industrial Organization, Elsevier, vol. 21(8), pages 1111-1133, October.
    5. Jianbo Zhang, 1997. "Strategic Delay and the Onset of Investment Cascades," RAND Journal of Economics, The RAND Corporation, vol. 28(1), pages 188-205, Spring.
    6. Robert L Ostergard, 2000. "The Measurement of Intellectual Property Rights Protection," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 31(2), pages 349-360, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    coordination game;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-04l10008. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.