Stackelberg Leadership with Product Differentiation and Endogenous Entry: Some Comparative Static and Limiting Results
Allowing for endogenous entry in the traditional Stackelberg setup with product differentiation, leads to reverting of the standard comparative static and limiting results. Unlike in the standard Stackelberg setup with barriers to entry, the leader's profit increases when the differentiation becomes lower. The reason is that competition becomes tougher when products become more alike, and consequently, fewer firms enter in equilibrium. On the other hand, increasing product differentiation towards its limit results in number of entrants tending to infinity and for very large market, the profit of the leader approaches zero. Thus market structure approaches monopolistic competition, rather than the standard monopoly outcome that occurs with exogenous number of followers.
|Date of creation:||Oct 2008|
|Date of revision:|
|Contact details of provider:|| Postal: P.O. Box 882, Politickych veznu 7, 111 21 Praha 1|
Phone: (+420) 224 005 123
Fax: (+420) 224 005 333
Web page: http://www.cerge-ei.cz
More information through EDIRC
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.:
- Mukherjee, Arijit, 2005. "Price and quantity competition under free entry," Research in Economics, Elsevier, vol. 59(4), pages 335-344, December.
- Cellini, Roberto & Lambertini, Luca & Ottaviano, Gianmarco I. P., 2004. "Welfare in a differentiated oligopoly with free entry: a cautionary note," Research in Economics, Elsevier, vol. 58(2), pages 125-133, June.
- Dixit, Avinash K., 1978.
"A Model of Duopoly Suggesting a Theory of Entry Barriers,"
The Warwick Economics Research Paper Series (TWERPS)
125, University of Warwick, Department of Economics.
- Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring.
- Hiroaki Ino & Toshihiro Matsumura, 2009.
"What role should public enterprises play in free-entry markets?,"
Discussion Paper Series
46, School of Economics, Kwansei Gakuin University, revised Jun 2009.
- Hiroaki Ino & Toshihiro Matsumura, 2010. "What role should public enterprises play in free-entry markets?," Journal of Economics, Springer, vol. 101(3), pages 213-230, November.
- Attila Tasnádi, 2009.
"Quantity-setting games with a dominant firm,"
EERI Research Paper Series
EERI_RP_2009_25, Economics and Econometrics Research Institute (EERI), Brussels.
- Federico Etro, 2006. "Aggressive leaders," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 146-154, 03.
- Federico Etro, 2007.
"Stackelberg competition with endogenous entry,"
121, University of Milano-Bicocca, Department of Economics, revised 2007.
- Vives, Xavier, 1985. "On the efficiency of Bertrand and Cournot equilibria with product differentation," Journal of Economic Theory, Elsevier, vol. 36(1), pages 166-175, June.
- Federico Etro, 2004. "Innovation by leaders," Economic Journal, Royal Economic Society, vol. 114(495), pages 281-303, 04.
- Federico Etro, 2006. "Market Leaders and Industrial Policy," Working Papers 103, University of Milano-Bicocca, Department of Economics, revised Nov 2006.
When requesting a correction, please mention this item's handle: RePEc:cer:papers:wp369. 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: (Jana Koudelkova)
If references are entirely missing, you can add them using this form.