Title: Duopoly dynamics with a barrier to entry
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.
Subjects: Oligopolies