Last-in first-out oligopoly dynamics
By: Jaap H. Abbring, Jeffrey R. Campbell
Contributors: Campbell, Jeffrey R.; Federal Reserve Bank of Chicago. Research Department
Series: Working paper series -- WP-2006-28; Working paper series (Federal Reserve Bank of Chicago. Research Department : Online) -- WP-2006-28.
Publisher: Federal Reserve Bank of Chicago
Published: 2006
Place of publication: Chicago, Ill.]
Language: eng
Format: [electronic resource] /
Subjects: Oligopolies
Description: "This paper extends the static analysis of oligopoly structure into an infinite- horizon setting with sunk costs and demand uncertainty.  The observation that exit rates decline with firm age motivates the assumption of last-in first- out dynamics: An entrant expects to produce no longer than any incumbent.  This selects an essentially unique Markov-perfect equilibrium.  With mild restrictions on the demand shocks, a sequence of thresholds describes firms' equilibrium entry and survival decisions.  Bresnahan and Reiss's (1993) empirical analysis of oligopolists' entry and exit assumes that such thresholds govern the evolution of the number of competitors.  Our analysis provides an infinite-horizon game- theoretic foundation for that structure"--Federal Reserve Bank of Chicago web site.
Notes: Title from PDF file as viewed on 1/18/2007.

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