| 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=mst |