nep-ind New Economics Papers
on Industrial Organization
Issue of 2011‒12‒05
one paper chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Learning and Collusion in New Markets with Uncertain Entry Costs By Francis Bloch; Simona Fabrizi; Steffen Lippert

  1. By: Francis Bloch (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X); Simona Fabrizi (Massey University - SIERC); Steffen Lippert (University of Otago - Department of Economics)
    Abstract: This paper analyzes an entry timing game with uncertain entry costs. Two firms receive costless signals about the cost of a new project and decide when to invest. We characterize the equilibrium of the investment timing game with private and public signals. We show that competition leads the two firms to invest too early and analyze collusion schemes whereby one firm prevents the other firm from entering the market. We show that, in the efficient collusion scheme, the active firm must transfer a large part of the surplus to the inactive firm in order to limit preemption.
    Keywords: Learning; Preemption; Innovation; New Markets; Project Selection; Entry Costs; Collusion; Private Information; Market Uncertainty
    Date: 2011–11–08
    URL: http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00639049&r=ind

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