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An Entry Game with Learning and Market Competition

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  • Chia-Hui Chen
  • Junichiro Ishida
  • Arijit Mukherjee

Abstract

This paper provides a dynamic game of market entry to illustrate entry dynamics in an uncertain market environment. Our model features both private learning about the market condition and market competition, which give rise to the first-mover and second-mover advantages in a unified framework. We characterize symmetric Markov perfect equilibria and identify a necessary and sufficient condition for the first-mover advantage to dominate, which elucidates when and under what conditions a firm becomes a pioneer, an early follower or a late entrant. We also derive equilibrium payoff bounds to show that pioneering entry is generally payoff-enhancing, even though it is driven by preemption motives, and discuss efficiency properties of entry dynamics.

Suggested Citation

  • Chia-Hui Chen & Junichiro Ishida & Arijit Mukherjee, 2018. "An Entry Game with Learning and Market Competition," ISER Discussion Paper 1043, Institute of Social and Economic Research, Osaka University.
    • Handle: RePEc:dpr:wpaper:1043
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    File URL: https://www.iser.osaka-u.ac.jp/library/dp/2018/DP1043.pdf
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    References listed on IDEAS

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