Entry, exit, and imperfect competition in the long run

Entry, exit, and imperfect competition in the long run

An infinite-horizon, stochastic model of entry and exit with sunk costs and imperfect competition is constructed. A subgame perfect Nash equilibrium for the general dynamic stochastic game is shown to exist as a limit of finite-horizon equilibria. This equilibrium has a relatively simple structure c...

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Bibliographic Details
Published in:Journal of economic theory Vol. 110; no. 1; pp. 191 - 203
Main Authors: Amir, Rabah, Lambson, Val E.
Format: Journal Article
Language:English
Published: New York Elsevier Inc 01-05-2003
Elsevier
Elsevier Science Publishing Company, Inc
Series:Journal of Economic Theory
Subjects:
Dynamic games
Economic theory
Entry and exit
Game theory
Integer constraints
Market entry
Market exit
Stochastic models
Studies
Entry and exit
Dynamic games
D43
C73
L13
Integer constraints
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Summary:An infinite-horizon, stochastic model of entry and exit with sunk costs and imperfect competition is constructed. A subgame perfect Nash equilibrium for the general dynamic stochastic game is shown to exist as a limit of finite-horizon equilibria. This equilibrium has a relatively simple structure characterized by two numbers per finite history. Under very general conditions, it tends to exhibit excessive entry and insufficient exit relative to a social optimum.
ISSN:0022-0531
1095-7235
DOI:10.1016/S0022-0531(03)00002-4