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To Grab for the Market or to Bide One's Time: A Dynamic Model of Entry

Author

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  • Levin, Dan
  • Peck, James

Abstract

We consider a simultaneous-move, dynamic-entry game. The fixed cost of entry is private information. Entering earlier increases the likelihood of being the monopolist but also increases the likelihood of coordination failure and simultaneous entry. We consider general continuous distributions for the fixed cost, and we characterize the unique symmetric sequential equilibrium in pure strategies. Comparative-statics results are derived. As the time between rounds approaches zero, all of the "action" occurs during an arbitrarily small amount of time. For the Bertrand model, we extend the analysis to allow for n firms. Copyright 2003 by the RAND Corporation.

Suggested Citation

  • Levin, Dan & Peck, James, 2003. "To Grab for the Market or to Bide One's Time: A Dynamic Model of Entry," RAND Journal of Economics, The RAND Corporation, vol. 34(3), pages 536-556, Autumn.
    • Handle: RePEc:rje:randje:v:34:y:2003:i:3:p:536-56
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    Citations

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    Cited by:

    1. Guy Meunier & Jean-Pierre Ponssard & Francisco Ruiz-Alizeda, 2015. "Antitrust Versus Industrial Policies, Entry And Welfare," Working Papers hal-01117091, HAL.
    2. Hanazono, Makoto & Yang, Huanxing, 2009. "Dynamic entry and exit with uncertain cost positions," International Journal of Industrial Organization, Elsevier, vol. 27(3), pages 474-487, May.
    3. van Leeuwen, Boris & Offerman, Theo & van de Ven, Jeroen, 2018. "Fight or Flight : Endogenous Timing in Conflicts," Discussion Paper 2018-052, Tilburg University, Center for Economic Research.
    4. Pavan, Giulia & Pozzi, Andrea & Rovigatti, Gabriele, 2020. "Strategic entry and potential competition: Evidence from compressed gas fuel retail," International Journal of Industrial Organization, Elsevier, vol. 69(C).
    5. , & ,, 2008. "Caller Number Five and related timing games," Theoretical Economics, Econometric Society, vol. 3(2), June.
    6. Levin, Dan & Peck, James, 2008. "Investment dynamics with common and private values," Journal of Economic Theory, Elsevier, vol. 143(1), pages 114-139, November.
    7. Tobias Kretschmer & Katrin Muehlfeld, 2006. "Co-Opetition and Prelaunch in Standard-Setting for Developing Technologies," CEP Discussion Papers dp0742, Centre for Economic Performance, LSE.
    8. Chen, Chia-Hui & Ishida, Junichiro & Mukherjee, Arijit, 2023. "Pioneer, early follower or late entrant: Entry dynamics with learning and market competition," European Economic Review, Elsevier, vol. 152(C).
    9. Chia-Hui Chen & Junichiro Ishida & Arijit Mukherjee, 2018. "An Entry Game with Learning and Market Competition," ISER Discussion Paper 1043, Institute of Social and Economic Research, Osaka University.
    10. Rossella Argenziano & Philipp Schmidt-Dengler, 2014. "Clustering In N-Player Preemption Games," Journal of the European Economic Association, European Economic Association, vol. 12(2), pages 368-396, April.
    11. John Bennett & Saul Estrin, 2006. "Regulatory Barriers and Entry in Developing Economies," Economics and Finance Discussion Papers 06-08, Economics and Finance Section, School of Social Sciences, Brunel University.
    12. repec:esx:essedp:741 is not listed on IDEAS
    13. Andreas Park & Lones Smith, 2004. "Caller Number Five: Timing Games that Morph From One Form to Another," 2004 Meeting Papers 871, Society for Economic Dynamics.
    14. Marc Rysman, 2003. "Adoption Delay in a Standards War," Working Papers 03-11, NET Institute, revised Oct 2003.
    15. Sridhar Balasubramanian & Shantanu Bhattacharya & Vish V. Krishnan, 2015. "Pricing Information Goods: A Strategic Analysis of the Selling and Pay-per-Use Mechanisms," Marketing Science, INFORMS, vol. 34(2), pages 218-234, March.
    16. Steven T. Anderson & Daniel Friedman & Ryan Oprea, 2010. "Preemption Games: Theory and Experiment," American Economic Review, American Economic Association, vol. 100(4), pages 1778-1803, September.
    17. John Bennett & Saul Estrin, 2006. "Regulatory Barriers & Entry in Developing Economies," William Davidson Institute Working Papers Series 824, William Davidson Institute at the University of Michigan.
    18. Yang, Xiaodong & Cai, Gangshu (George) & Chen, Ying-Ju & Yang, Shu-Jung Sunny, 2017. "Competitive Retailer Strategies for New Market Research, Entry and Positioning Decisions," Journal of Retailing, Elsevier, vol. 93(2), pages 172-186.
    19. Becker, Jan U. & Clement, Michel & Nöth, Markus, 2016. "Start-ups, incumbents, and the effects of takeover competition," Journal of Business Research, Elsevier, vol. 69(12), pages 5925-5933.
    20. McAdams, David, 2015. "On the benefits of dynamic bidding when participation is costly," Journal of Economic Theory, Elsevier, vol. 157(C), pages 959-972.
    21. Eric Rasmusen & Young-Ro Yoon, 2008. "First versus Second-Mover Advantage with Information Asymmetry about the Size of New Markets," Working Papers 2008-15, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    22. Rossella Argenziano & Philipp Schmidt-Dengler, 2014. "Clustering In N-Player Preemption Games," Journal of the European Economic Association, European Economic Association, vol. 12(2), pages 368-396, 04.

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