Auctions with Endogenous Valuations: The Persistence of Monopoly Revisited
It is shown that the standard arguments for a monopoly to persist break down when many units of capacity become available sequentially. The reason is that deterring entry at one st age affects the cost of doing so in later stages. This force can be so powerful that entry is deterred only at the final stage. The persistence of monopoly or its erosion over time depends on the timi ng of arrival of capacity, the size of early versus subsequent capacity availability, the length of the capacity-acquisition stage relative to the life of the industry, and the discount factor. Copyright 1993 by American Economic Association.
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