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Market Entry Dynamics with a Second-Mover Advantage

Author

Listed:
  • Smirnov Vladimir

    (University of Sydney, v.smirnov@econ.usyd.edu.au)

  • Wait Andrew

    (University of Sydney, a.wait@econ.usyd.edu.au)

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.

Suggested Citation

  • Smirnov Vladimir & Wait Andrew, 2007. "Market Entry Dynamics with a Second-Mover Advantage," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 7(1), pages 1-25, April.
    • Handle: RePEc:bpj:bejtec:v:7:y:2007:i:1:n:11
    DOI: 10.2202/1935-1704.1287
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    Cited by:

    1. Jane M. Binner & Leslie R. Fletcher & Vassili Kolokoltsov & Francesco Ciardiello, 2013. "External Pressure on Alliances: What Does the Prisoners’ Dilemma Reveal?," Games, MDPI, vol. 4(4), pages 1-22, December.
    2. Vinh Du Tran & David S. Sibley & Simon Wilkie, 2012. "Second Mover Advantage and Entry Timing," Journal of Industrial Economics, Wiley Blackwell, vol. 60(3), pages 517-535, September.

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