A BEJTE Advances article.

Abstract

We study a market-entry game with a second-mover advantage. In the symmetric equilibrium, there can be a non-monotonic relationship between the probability with which a player will invest (entry) and the length of time until the deadline. Moreover, the probability of investment can move chaotically as the horizon is extended. In the limit when the period length goes to zero chaotic trajectories arise when the efficiency effect does not hold -- that is, when the one-period monopoly profit is less than the total of the one-period duopoly profits. We also show that the presence of chaotic trajectories is associated with a smaller expected delay in entry.

Submitted: February 13, 2006 · Accepted: November 1, 2006 · Published: April 5, 2007

Recommended Citation

Smirnov, Vladimir and Wait, Andrew (2007) "Market Entry Dynamics with a Second-Mover Advantage," The B.E. Journal of Theoretical Economics: Vol. 7 : Iss. 1 (Advances), Article 11.
DOI: 10.2202/1935-1704.1287
Available at: http://www.bepress.com/bejte/vol7/iss1/art11