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An Entry Game with Learning and Market Competition (with Junichiro Ishida (Osaka University) and Arijit Mukherjee (Nottingham University))

Lunch-Seminar CIREQ-Concordia 2018-2019
joint with the Department of Economics, Concordia University

room H-1154 (Concordia University, 1455 de Maisonneuve Blvd West, 11th floor)

Organizer : Ming Li (Concordia U.) 

 


 

Abstract

This paper provides a dynamic game of market entry to illustrate the emergence of a market pioneer and its welfare implications. Our model features both market competition and private learning about the market condition, which give rise to the first-mover and second-mover advantages in a unified framework. We characterize symmetric Markov perfect equilibria and identify a necessary and sufficient condition for the first-mover advantage to dominate, which elucidates when and under what conditions a firm becomes a pioneer, an early follower or a late entrant. We also derive equilibrium payoff bounds to show that pioneering entry is generally payoff-enhancing, even though it is driven by preemption motives, and discuss efficiency properties of entry dynamics.

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