Entry games and free entry equilibria

Michele Polo

Chapter 11 in Handbook of Game Theory and Industrial Organization, Volume I, 2018, pp 312-342 from Edward Elgar Publishing

Abstract: This chapter reviews the theoretical literature on entry games and free entry equilibria. We show that a wide range of symmetric oligopoly models share common comparative statics properties. Individual profits and quantities decrease in the number of firms, and tend to competitive or monopolistic competitive equilibria when the number of firms increases indefinitely. The maximum number of firms sustainable in a symmetric long-run equilibrium depends on technology (economies of scale), preferences (market size) and strategies (toughness of price competition). On the normative side, in homogeneous product markets the business-stealing effect drives the result of excessive entry, whereas adding product differentiation and the utility from variety may revert the result. We then consider asymmetric free entry equilibria that exploit the aggregative nature of many oligopoly models. Finally, we discuss endogenous sunk costs and persistent concentration and frictionless entry and contestable markets.

Keywords: Economics and Finance (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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Working Paper: Entry Games and Free Entry Equilibria (2016)
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