Entry and Exit

Robert Wilson ()

Chapter 8 in The Economics of Imperfect Competition and Employment, 1989, pp 260-304 from Palgrave Macmillan

Abstract: Abstract Analyses of industrial competition have attained a new vigor with the application of game-theoretic methods. The process of competition is represented in models that reflect genuine struggles for entry, market power, and continuing survival. Dynamics and informational effects are captured explicitly, although so far only in simplified formulations. Recognition of the importance and intricate complexities of competitive processes began a half-century ago in the work of Joan Robinson (1933), and the first game-theoretic formulations were developed by Shubik (1959) a quarter-century later, but the flowering of this approach began in the 1980s with the recognition that informational asymmetries are crucial ingredients to bring the flavor of struggle to the ensuing dynamic processes. Models that admit both dynamics and private information formulate competition as essentially a bargaining process in which credible communication is limited to costly actions. Each firm’s claim to survival is signalled by its willingness to offer lower prices longer than others. Firms’ struggles for the advantages of monopoly power bring benefits to consumers by dissipating a substantial part of the subsequent profits in the battle to obtain them. This is not the entire story of competition, of course, since also important are, for example, races for cost advantages, product development and differentiation, as well as imposition of search and switching costs on customers to sustain monopoly pricing; nevertheless, it brings theories that describe more realistically the Darwinian aspect of competition.

Keywords: Fixed Cost; Expected Profit; Probability Assessment; Limit Price; Monopoly Price (search for similar items in EconPapers)
Date: 1989
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-08630-6_8

Ordering information: This item can be ordered from
http://www.palgrave.com/9781349086306

DOI: 10.1007/978-1-349-08630-6_8

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().