The market entry paradox

Frank Stähler

No 777, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: This paper discusses a simultaneous market entry game between two firms with different fixed costs. This case is a typical application of mixed strategy equilibria. Conventional wisdom would suggest that the low-cost firm is more likely to enter the market. This presumption is wrong. Instead, the paper demonstrates a market entry paradox: the equilibrium probability of entry is higher for the high-cost firm than the equilibrium probability of entry of the low-cost firm.

Keywords: Market entry; mixed strategy equilibrium (search for similar items in EconPapers)
JEL-codes: D43 L13 (search for similar items in EconPapers)
Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:777

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