ENTRY PATTERNS OVER THE PRODUCT LIFE CYCLE

Óscar Gutiérrez and Francisco Ruiz-Aliseda ()

Manchester School, 2009, vol. 77, issue 5, pages 594-610

Abstract: We study a game-theoretic real options model of new market entry based on empirical evidence of demand for a new product growing over time and eventually falling. Yet, firms do not know ex ante when this will occur, which creates incentives to update information by delaying irreversible entry. By assuming that the construction of a new productive plant takes some time and is unobservable in the meantime, while operation in the market is not, we show that entry rates increase or decrease under certain conditions related to the rate at which flow profits decrease as more firms enter the industry. Copyright © 2009 The Authors. Journal compilation © 2009 Blackwell Publishing Ltd and The University of Manchester.

Date: 2009

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Working Paper: Entry Patterns over the Product Life Cycle (2003)
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