Entry Games and Free Entry Equilibria

Michele Polo

No 87, IEFE Working Papers from IEFE, Center for Research on Energy and Environmental Economics and Policy, Universita' Bocconi, Milano, Italy

Abstract: This Chapter reviews the theoretical liteature 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 utillity 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: Entry; Free entry equilibria; endogenous and exogsnous sunk costs; contestable markets (search for similar items in EconPapers)
JEL-codes: D43 L1 L13 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2016
New Economics Papers: this item is included in nep-bec, nep-com and nep-gth
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Chapter: Entry games and free entry equilibria (2018)
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