Entry and Exit With Information Externalities
In the paper we analyze how the possibility of revealing information to a competitor alters the entry/investment behavior of a first entrant. We show that once it has entered the market, the firm might refrain from making further profitable investments in order to hide information from the competitor. Moreover, we show that before entering the market, the first entrant anticipates that there is a strategic advantage in choosing an initially small scale of entry: in this way it 'commits' itself to revealing the true state of the market with its subsequent decisions and this fact is beneficial since it induces the competitor to postpone entry into market.
|Date of creation:||21 Oct 2005|
|Note:||Type of Document - pdf; pages: 25. An updated version of the paper is forthcoming in the Journal of Economic Behavior and Organization and it is available as 'article in press' in the homepage of the journal|
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