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Multiple rounds in a chain store game

Author

Listed:
  • Michael Melles

    (Helvetia Insurances)

  • Rainer Nitsche

    (E.CA Economics and European School of Management and Technology)

Abstract

In textbook models of reputation, a number of entry games are played sequentially. A multimarket incumbent—the chain store—deters entry of “early” small entrants with a threat of predation. In the last markets of the game, entry occurs stochastically. We show that this stochastic entry is due to a restrictive assumption and vanishes if entrants that initially decided to stay out are allowed to reconsider their decision following entry elsewhere.

Suggested Citation

  • Michael Melles & Rainer Nitsche, 2016. "Multiple rounds in a chain store game," Theory and Decision, Springer, vol. 81(4), pages 571-579, November.
    • Handle: RePEc:kap:theord:v:81:y:2016:i:4:d:10.1007_s11238-016-9551-2
    DOI: 10.1007/s11238-016-9551-2
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    References listed on IDEAS

    as
    1. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August.
    2. Milgrom, Paul & Roberts, John, 1982. "Predation, reputation, and entry deterrence," Journal of Economic Theory, Elsevier, vol. 27(2), pages 280-312, August.
    3. Masso, Jordi, 1996. "A Note on Reputation: More on the Chain-Store Paradox," Games and Economic Behavior, Elsevier, vol. 15(1), pages 55-81, July.
    4. Drew Fudenberg & David M. Kreps, 1987. "Reputation in the Simultaneous Play of Multiple Opponents," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(4), pages 541-568.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Multimarket Firms; Entry; Predation; Reputation;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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