This paper analyzes market structures where leaders have a first mover advantage and entry by the followers is endogenous. The strategy of the leaders is always more aggressive than the strategy of the followers independently from strategic substitutability or complementarity. Under quantity competition, the leader produces more than any other firm and I determine the conditions for entry deterrence to be optimal (high substitutability and constant or decreasing marginal costs). Under price competition, the leader sets a lower price than each follower, just the opposite than with an exogenous number of firms. In contests the leader invests more than each follower. In all these cases a leadership improves the allocation of resources compared to the Nash equilibrium with endogenous entry.

Etro, F. (2007). Stackelberg competition with endogenous entry [Working paper del dipartimento].

Stackelberg competition with endogenous entry

ETRO, FEDERICO
2007

Abstract

This paper analyzes market structures where leaders have a first mover advantage and entry by the followers is endogenous. The strategy of the leaders is always more aggressive than the strategy of the followers independently from strategic substitutability or complementarity. Under quantity competition, the leader produces more than any other firm and I determine the conditions for entry deterrence to be optimal (high substitutability and constant or decreasing marginal costs). Under price competition, the leader sets a lower price than each follower, just the opposite than with an exogenous number of firms. In contests the leader invests more than each follower. In all these cases a leadership improves the allocation of resources compared to the Nash equilibrium with endogenous entry.
Working paper del dipartimento
Scientifica
Stackelberg Competition; Leadership; Free Entry
English
Etro, F. (2007). Stackelberg competition with endogenous entry [Working paper del dipartimento].
Etro, F
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/23148
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