Stackelberg competition with endogenous entry

Federico Etro ()

No 121, Working Papers from University of Milano-Bicocca, Department of Economics

Abstract: This paper analyzes market structures where leaders have a first mover advantage and entry by the followers is endogenous. The strategy of the leaders is always more aggressive than the strategy of the followers independently from strategic substitutability or complementarity. Under quantity competition, the leader produces more than any other firm and I determine the conditions for entry deterrence to be optimal (high substitutability and constant or decreasing marginal costs). Under price competition, the leader sets a lower price than each follower, just the opposite than with an exogenous number of firms. In contests the leader invests more than each follower. In all these cases a leadership improves the allocation of resources compared to the Nash equilibrium with endogenous entry.

Keywords: Stackelberg Competition; Leadership; Free Entry (search for similar items in EconPapers)
JEL-codes: L11 L13 L16 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2007, Revised 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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http://repec.dems.unimib.it/repec/pdf/mibwpaper121.pdf First version, 2007 (application/pdf)

Related works:
Journal Article: Stackelberg Competition with Endogenous Entry (2008)
Journal Article: Stackelberg Competition with Endogenous Entry (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:mib:wpaper:121

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