Journal of Economics
entry, externality, duopoly
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.
Copyright © Springer-Verlag 2002
Accepted Author Manuscript
Lin, P., & Saggi, K. (2002). Timing of entry under externalities. Journal of Economics, 75(3), 211-225. doi: 10.1007/s007120200017