Efficient Entry in Cournot (Global) games

Rodrigo Harrison and Pedro Jara-Moroni

FAE-USACH Working Papers Series from Facultad de Administración y Economía. Universidad de Santiago de Chile

Abstract: IWe present a two stage entry game in which a large number of firms choose simultaneouslywhether to enter a market or not. Firms that decide to enter the market produce a homogeneousgood facing Cournot competition under a parametrized demand. Using a global game approach, weshow that there exist selection of a unique equilibrium in the first stage entry game, in which thereis efficient entry, i.e. firms that enter are the ones with the lowest entry cost, providing theoreticalfoundation for the equilibrium selection assumption utilized in entry models in the empirical entryliterature. We explore as well efficiency properties of the selected equilibrium and provide examplesthat do not fit our general framework, but where similar results may be obtained.

Keywords: Cournot; Global game; Equilibrium selection; Strategic substitutes (search for similar items in EconPapers)
JEL-codes: C72 D82 L13 (search for similar items in EconPapers)
Pages: pages
Date: 2021-04
New Economics Papers: this item is included in nep-com, nep-gth and nep-mic
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ars:papers:991944255606116

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