Endogenously Asynchronous Entries into an Uncertain Industry

Midori Hirokawa and Dan Sasaki

Journal of Economics & Management Strategy, 2001, vol. 10, issue 3, 435-461

Abstract: We model and analyze a priori symmetric duopoly where supply quantity adjustment is slow and time‐consuming. The state of demand is ex ante uncertain, and becomes observable a certain time period after at least one firm's entry. We characterize those conditions under which sequential entries can be endogenously chosen either as an asymmetric pure‐strategy equilibrium or as a consequence of a symmetric mixed‐strategy equilibrium. Also, in the limit where information revelation is infinitely fast (i.e., the time period it requires becomes infinitesimally short), the expected waiting time until the first entry does not necessarily become proportionately short, whilst the time interval between the leader's entry and the follower's entry does become infinitesimally short. This suggests that chronologically nearly simultaneous entry should not necessarily be interpreted as counterevidence against leader‐follower relations. In addition to equilibrium comparative statics, we also analyze some of the welfare issues associated with strategic timing of entry.

Date: 2001
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