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Entry and Exit Under Demand Uncertainty


  • Vettas, Nikolaos



This paper presents a dynamic model of entry and exit in competitive markets with demand uncertainty and Bayesian learning. There is a unique equilibrium path characterized by a pair of simple zero-expected profit equations.

Suggested Citation

  • Vettas, Nikolaos, 1997. "Entry and Exit Under Demand Uncertainty," Working Papers 97-31, Duke University, Department of Economics.
  • Handle: RePEc:duk:dukeec:97-31

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    References listed on IDEAS

    1. Philippe Aghion & Patrick Bolton & Christopher Harris & Bruno Jullien, 1991. "Optimal Learning by Experimentation," Review of Economic Studies, Oxford University Press, vol. 58(4), pages 621-654.
    2. Joseph Zeira, 1994. "Informational Cycles," Review of Economic Studies, Oxford University Press, vol. 61(1), pages 31-44.
    3. Andrew Caplin & John Leahy, 1993. "Sectoral Shocks, Learning, and Aggregate Fluctuations," Review of Economic Studies, Oxford University Press, vol. 60(4), pages 777-794.
    4. Easley, David & Kiefer, Nicholas M, 1988. "Controlling a Stochastic Process with Unknown Parameters," Econometrica, Econometric Society, vol. 56(5), pages 1045-1064, September.
    5. Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 421-440, December.
    6. Rafael Rob, 1991. "Learning and Capacity Expansion under Demand Uncertainty," Review of Economic Studies, Oxford University Press, vol. 58(4), pages 655-675.
    7. Gort, Michael & Klepper, Steven, 1982. "Time Paths in the Diffusion of Product Innovations," Economic Journal, Royal Economic Society, vol. 92(367), pages 630-653, September.
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    Cited by:

    1. 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.
    2. Andrew Eckert & Douglas West, 2008. "Firm Survival and Chain Growth in a Privatized Retail Liquor Store Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 32(1), pages 1-18, February.

    More about this item

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty


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