The Role of Limit Pricing in Sequential Entry Models
In this paper we establish a complete characterization of the strategic interaction of firms in sequential entry models. The limit price plays an important coordinating role in non-cooperative sequential entry models. We show that for many firms in a large range of sequential entry equilibria, the limit price is effectively parametric, so that firms make investment decisions in a quasi-competitive manner. Entry deterrence is only pursued by firms at the beginning of the sequence if it is profitable; otherwise it is delegated to the last firms to enter.
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