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Dynamic Entry Games: The Case Of Natural Duopoly

Author

Listed:
  • RIM LAHMANDI-AYED

    (LIM, Ecole Polytechnique de Tunisie, BP 743, 2078 La Marsa, Tunisia)

Abstract

In the case of natural duopoly, we suggest a finitely repeated game between two incumbent firms and a potential entrant that limits the incumbent firms' power and compels them to approach economic efficiency. We prove that such a game admits a perfect subgame equilibrium along which the incumbent firms maintain with equal quantities while preventing entry. Moreover, the incumbents' strategies along this path converge to average cost pricing quantities as the number of periods goes to infinity.

Suggested Citation

  • Rim Lahmandi-Ayed, 2006. "Dynamic Entry Games: The Case Of Natural Duopoly," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 8(04), pages 701-713.
    • Handle: RePEc:wsi:igtrxx:v:08:y:2006:i:04:n:s021919890600120x
    DOI: 10.1142/S021919890600120X
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    More about this item

    Keywords

    Natural duopoly; dynamic game; market attribution rule; efficiency; JEL Numbers: L13; JEL Numbers: D43;
    All these keywords.

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • C0 - Mathematical and Quantitative Methods - - General
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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