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|
|Date of revision:|
|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|
|Contact details of provider:|| Web page: http://econwpa.repec.org|
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.:
- Kim Alexander-Cook & Dan Bernhardt & Joanne Roberts, 1995.
"Riding Free on the Signals of Others,"
927, Queen's University, Department of Economics.
- Toivanen, O. & Waterson, M., 2001.
"Market Structure and Entry: Where's the Beef?,"
The Warwick Economics Research Paper Series (TWERPS)
593, University of Warwick, Department of Economics.
- Giovanni Maggi, 1996. "Endogenous Leadership in a New Market," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 641-659, Winter.
- Gale, D. & Chamley, C., 1992.
"Information Revelation and Strategic Delay in a Model of Investment,"
10, Boston University - Department of Economics.
- Chamley, Christophe & Gale, Douglas, 1994. "Information Revelation and Strategic Delay in a Model of Investment," Econometrica, Econometric Society, vol. 62(5), pages 1065-85, September.
- Ashoka Mody & Krishna Srinivasan, 1998. "Japanese and United States Firms as Foreign Investors: Do they march to the same tune?," Canadian Journal of Economics, Canadian Economics Association, vol. 31(4), pages 778-799, November.
- Ernesto Somma, .
"The Effect of Incomplete Information about Future Technological Opportunities on Pre-Emption,"
95/41, Department of Economics, University of York.
- Somma, Ernesto, 1999. "The effect of incomplete information about future technological opportunities on pre-emption," International Journal of Industrial Organization, Elsevier, vol. 17(6), pages 765-799, August.
- McGahan, A. M., 1993. "The effect of incomplete information about demand on preemption," International Journal of Industrial Organization, Elsevier, vol. 11(3), pages 327-346, September.
- Wheeler, David & Mody, Ashoka, 1992. "International investment location decisions : The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76, August.
- Gul, Faruk & Lundholm, Russell, 1995. "Endogenous Timing and the Clustering of Agents' Decisions," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 1039-66, October.
- Caplin, A. & Leahy, J., 1993.
"Miracle on Sixth Avenue: Information Externalities and Search,"
Harvard Institute of Economic Research Working Papers
1665, Harvard - Institute of Economic Research.
- Caplin, Andrew & Leahy, John, 1998. "Miracle on Sixth Avenue: Information Externalities and Search," Economic Journal, Royal Economic Society, vol. 108(446), pages 60-74, January.
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
- Rafael Rob, 1991. "Learning and Capacity Expansion under Demand Uncertainty," Review of Economic Studies, Oxford University Press, vol. 58(4), pages 655-675.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpio:0510006. 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: (EconWPA)
If references are entirely missing, you can add them using this form.