The Value of Information in Oligopoly with Endogenous Entry

Jihwan Do and Jeremy Kettering
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Jihwan Do: Yonsei University
Jeremy Kettering: Alvernia University

No 2025rwp-253, Working papers from Yonsei University, Yonsei Economics Research Institute

Abstract: We examine a model of imperfect competition characterized by endogenous entry, where two firms decide whether to enter the market or remain out and subsequently determine their output upon entry. A key aspect of the model is the presence of uncertain market demand, with one firm possessing an informational advantage over its competitor. It is shown that in the unique equilibrium with endogenous entry, informational asymmetry distorts the entry incentives for the better-informed firm, potentially causing it to earn lower profits than its rival. Moreover, market entry may be excessive from a consumer surplus viewpoint, and more precise information can have non-monotonic effects on welfare due to the entry distortions. Within this framework, we also analyze various regulatory measures and policies aimed at enhancing consumer welfare.

Keywords: Oligopoly; Market entry; Asymmetric information; Competition policy; Strategic disadvantage of information (search for similar items in EconPapers)
JEL-codes: D43 D82 L13 L50 (search for similar items in EconPapers)
Pages: 58pages
Date: 2025-06
New Economics Papers: this item is included in nep-com, nep-gth and nep-mic
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