Sunk costs, entry and clustering

Alexander Matros, Vladimir Smirnov and Andrew Wait ()
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Andrew Wait: University of Sydney

Economic Theory, 2024, vol. 77, issue 3, No 6, 747-782

Abstract: Abstract We examine how differences in firm sunk entry costs affect both entry order and the potential for clustering in a triopoly preemption game. If the cost asymmetry between the firms is sufficiently large, the firms always enter in the order from the lowest to highest cost, whereas if firms are relatively symmetric, it is possible that the second-highest cost firm enters first. There is never clustering of entry when there is any difference in cost between the two most productively efficient firms. Lastly, when the cost asymmetry between firms is large, the leader’s entry time in the triopoly is always earlier than it is in a duopoly.

Keywords: Timing games; Asymmetric firms; Clustering; Inefficient entry (search for similar items in EconPapers)
JEL-codes: C72 L13 O31 O33 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s00199-023-01504-1

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