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Dynamic equilibrium with randomly entering and exiting firms of different types

Author

Listed:
  • Pierre Bernhard

    (MACBES Team, INRIA Center of Université Côte d'Azur, Sophia Antipolis, France)

  • Romain Biard

    (Université Marie et Louis Pasteur, CNRS, LmB, F-25000 Besançon, France)

  • Marc Deschamps

    (Université Marie et Louis Pasteur, CRESE, UR3190, F-25000 Besançon, France)

Abstract

There exist situations where firms (identical or not) are in a state of renewed interaction and where, at each period, in addition to exits, new firms (identical or not) may arrive. In such cases, no one is able to know ex ante exactly how many firms there will be in each period. One of the questions an incumbent firm might therefore ask itself, in this context, is what expected payoff it can expect. Our paper aims to provide an answer to this question, in finite and infinite horizons, using a discrete-time dynamic game with random arrival(s) and exit(s) of different types of firm(s). We first propose a general model, which we then particularize by considering the types as composed of identical players. Within this framework, we address the case of a dynamic Cournot oligopoly with sticky prices, and provide numerical illustrations to underline the interest of this approach and demonstrate its operational character.

Suggested Citation

  • Pierre Bernhard & Romain Biard & Marc Deschamps, 2025. "Dynamic equilibrium with randomly entering and exiting firms of different types," Working Papers 2025-01, CRESE.
    • Handle: RePEc:crb:wpaper:2025-01
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Oligopoly; Random entries and exits; Types; Dynamic equilibirum; Cournot; sticky prices.;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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