Entry Games Under Private Information

50 Pages Posted: 6 Apr 2018

See all articles by José-Antonio Espín-Sánchez

José-Antonio Espín-Sánchez

Yale University; Yale University - Cowles Foundation; Economic Growth Center

Alvaro Parra

University of British Columbia (UBC) - Sauder School of Business

Date Written: April 3, 2018

Abstract

We study market entry decisions when firms have private information about their profitability. We generalize current models by allowing general forms of market competition and heterogeneous firms that self-select when entering the market. Post-entry profits depend on market structure, and on the identities and the private information of the entering firms. We introduce a notion of the firm's strength and show that an equilibrium where players' strategies are ranked by strength, or herculean equilibrium, always exists. Moreover, when profits are elastic enough with respect to the firm's private information, the herculean equilibrium is the unique equilibrium of the game.

Keywords: Entry, Oligopolistic markets, Private Information

Suggested Citation

Espin-Sanchez, Jose-Antonio and Parra, Alvaro, Entry Games Under Private Information (April 3, 2018). Cowles Foundation Discussion Paper No. 2126, Available at SSRN: https://ssrn.com/abstract=3156318 or http://dx.doi.org/10.2139/ssrn.3156318

Jose-Antonio Espin-Sanchez (Contact Author)

Yale University ( email )

28 Hillhouse Ave
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United States
2034320890 (Phone)

HOME PAGE: http://campuspress.yale.edu/espin/

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Economic Growth Center ( email )

Box 208269
New Haven, CT 06520-8269
United States

HOME PAGE: http://https://egcenter.economics.yale.edu/

Alvaro Parra

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

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