DYNAMIC ENTRY GAMES: THE CASE OF NATURAL DUOPOLY

Rim Lahmandi-Ayed

International Game Theory Review (IGTR), 2006, vol. 08, issue 04, 701-713

Abstract: In the case of natural duopoly, we suggest a finitely repeated game between two incumbent firms and a potential entrant that limits the incumbent firms' power and compels them to approach economic efficiency. We prove that such a game admits a perfect subgame equilibrium along which the incumbent firms maintain with equal quantities while preventing entry. Moreover, the incumbents' strategies along this path converge to average cost pricing quantities as the number of periods goes to infinity.

Keywords: Natural duopoly; dynamic game; market attribution rule; efficiency; JEL Numbers: L13; JEL Numbers: D43 (search for similar items in EconPapers)
JEL-codes: B4 C0 C6 C7 D5 D7 M2 (search for similar items in EconPapers)
Date: 2006
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DOI: 10.1142/S021919890600120X

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