Document Type
Journal article
Source Publication
Journal of Economics
Publication Date
4-1-2002
Volume
75
Issue
3
First Page
211
Last Page
225
Keywords
entry, externality, duopoly
Abstract
This paper constructs a model where two firms simultaneously choose their time of entry into a market. Under sequential entry, the second entrant is assumed to face a lower entry cost because of positive externalities from the first firm's entry. The model generates sequential entry if the magnitude of the externality is large relative to the post-entry duopoly profit, and simultaneous entry otherwise. In a sequential entry equilibrium, the first entrant fares better than the second and the second entrant does not necessarily enter too late from the viewpoint of social welfare. When firms have different costs of production, the efficient firm is more likely to enter first.
DOI
10.1007/s007120200017
Print ISSN
09318658
E-ISSN
16177134
Publisher Statement
Copyright © Springer-Verlag 2002
Full-text Version
Accepted Author Manuscript
Language
English
Recommended Citation
Lin, P., & Saggi, K. (2002). Timing of entry under externalities. Journal of Economics, 75(3), 211-225. doi: 10.1007/s007120200017