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

Recommended Citation

Lin, P., & Saggi, K. (2002). Timing of entry under externalities. Journal of Economics, 75(3), 211-225. doi: 10.1007/s007120200017