Duopoly dynamics with a barrier to entry
By: Jaap H. Abbring, Jeffrey R. Campbell
Contributors: Campbell, Jeffrey R.; Federal Reserve Bank of Chicago. Research Department
Series: Working paper series -- WP-2006-29; Working paper series (Federal Reserve Bank of Chicago. Research Department : Online) -- WP-2006-29.
Publisher: Federal Reserve Bank of Chicago
Published: 2006
Place of publication: Chicago, Ill.]
Language: eng
Format: [electronic resource] /
Subjects: Oligopolies
Description: "This paper considers the effects of raising the cost of entry for potential competitors on infinite-horizon Markov- perfect industry dynamics with ongoing demand uncertainty.  All entrants serving the model industry incur sunk costs, and exit avoids future fixed costs.  We focus on the unique equilibrium with last- in first-out expectations: a firm never exits before a younger rival does.  When an industry can support at most two firms, we prove that raising barriers to a second producer's entry increases the probability that some firm will serve the industry and decreases its long-run entry and exit rates.  In numerical examples with more than two firms, imposing a barrier to entry stabilizes industry structure"--Federal Reserve Bank of Chicago web site.
Notes: "Revised April 2007."

Title from PDF file as viewed on 1/18/2007.

Includes bibliographical references.

Also available in print.

System requirements: Adobe Acrobat Reader.

Mode of access: World Wide Web.