When Does First-Mover Advantage Reflect Preemptive Motives?

Abstract

The order-of-entry coefficient in regressions of long-run performance on entry rank is often interpreted as evidence of strategic preemption. This paper shows when that interpretation is valid. The same coefficient can arise from different combinations of strategic behavior and cost-driven selection, so it does not identify preemption on its own. I derive a sharp identified set for the preemption share, whose width depends on the discount factor, cost shocks, and the spectral gap of the equilibrium transition kernel. An empirical illustration shows that even precise estimates can be uninformative when equilibrium dynamics are persistent. Faster mixing yields tighter bounds.

Keywords: Discrete Choice Models, Dynamic Games, Entry Deterrence, First Mover Advantages, Measurement Bias, Strategic Motives, Reduced Form Analysis

JEL Classification: C73, L13, C52, L10, C51