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Firm scale and the endogenous timing of entry: A choice between commitment and flexibility. (English) Zbl 0870.90048
Summary: This paper presents a model of stochastic oligopoly with demand uncertainty where firms endogenously choose entry timing. We examine two extreme types of market structure and show that the equilibrium correspondence that connects them is continuous. With two identically sized firms, there are symmetric, Cournot type equilibria where the probability of early entry declines with greater uncertainty, and for low uncertainty two asymmetric equilibria. With one large firm with a continuum of nonatomic firms, there is a unique Stackelberg equilibrium. We conclude that the behavior of a dominant firm with a finite fringe can be approximated by Stackelberg equilibrium.

MSC:
91B26 Auctions, bargaining, bidding and selling, and other market models
93E03 Stochastic systems in control theory (general)
91A65 Hierarchical games (including Stackelberg games)
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