Inefficient entry order in preemption games

Argenziano, Rossella; Schmidt-Dengler, Philipp

doi:10.1016/j.jmateco.2012.08.007

Cited by 18 publications

(9 citation statements)

References 18 publications

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“…We first explore situations in which the familiar second-mover advantage equilibria arise in the case with asymmetric firms. To do so, while we place no restrictions on the leader payoff functions (other than continuity), in a similar way to Hoppe and Lehmann-Grube ( 2005) and Argenziano and Schmidt-Dengler (2012, 2013, 2014, first consider the situation when both F 1 (t) and F 2 (t) are non-increasing. This could be the case, for instance, when later entry by the leader affords it to enter the market with a better (less costly) production technology or product, or possibly both, which in turn exerts greater competitive pressure on the second entrant.…”

Section: Asymmetric Firmsmentioning

confidence: 99%

“…This framework has been used to study a range of applications. For example, Argenziano and Schmidt-Dengler (2012, 2013, 2014 adopt a variant of Fudenberg and Tirole (1985) to examine the order of market entry, clustering and delay. They show that with many potential entrants the most efficient firm need not be the first to enter the market and that delays are non-monotonic with the number of firms.…”

Section: Introductionmentioning

confidence: 99%

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Preemption with a second-mover advantage

Smirnov

Wait

2021

Games and Economic Behavior

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We examine innovation in a market-entry timing game with complete information and observable actions when there is a second-mover advantage. Allowing for heterogenous payoffs between players, and for both leader's and follower's payoff functions to be multi-peaked and non-monotonic, we find that there are at most two pure-strategy subgame perfect equilibria. Sometimes these resemble familiar second-mover advantage equilibria from the literature. However, we show that despite there being a follower advantage at all times, there can be a preemption equilibrium with inefficient early entry. In fact, immediate entry is possible in a continuous analogue of the centipede game. These results are related to the observed premature entry and product launches in various markets.

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Section: Asymmetric Firmsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Preemption with a second-mover advantage

Smirnov

Wait

2021

Games and Economic Behavior

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“…Second, many theoretical papers have studied preemption games, including Fudenberg and Tirole (1985), Riordan (1992), Quint and Einav (2005), and Argenziano and Schmidt-Dengler (2012). Few empirical papers structurally estimate such models, but Schmidt-Dengler (2006) and Igami (forthcoming) do so in the specific context of technology adoption.…”

Section: Related Literaturementioning

confidence: 99%

Unobserved heterogeneity in dynamic games: Cannibalization and preemptive entry of hamburger chains in Canada

Igami

Yang

2016

Quantitative Economics

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We develop a dynamic entry model of multi-store oligopoly with heterogeneous markets, and estimate it using data on hamburger chains in Canada (1970Canada ( -2005. Because more lucrative markets attract more entry, firms appear to favor the presence of more rivals. Thus unobserved heterogeneity across geographical markets creates an endogeneity problem and poses a methodological challenge in the estimation of dynamic games, which we address by combining the procedures proposed by Kasahara and Shimotsu (2009), Arcidiacono and Miller (2011), and Bajari, Benkard, and Levin (2007. The results suggest that the omission of unobserved market heterogeneity attenuates the estimates of competition, and the trade-off between cannibalization and preemption is an important factor behind the evolution of market structure.

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“…Bobtcheff and Mariotti (2012) explore the uncertainty regarding the presence of a competitor. Argenziano and Schmidt-Dengler (2012) analyze a preemption game of entry into a new market in which the potential entrants are asymmetric in production cost, showing that the equilibrium entry order may not reflect the true efficiency ranking. Argenziano and Schmidt-Dengler (2013) note that in a preemption game, increasing the number of competitors beyond a duopoly does not bring forward the time of first entry.…”

Section: Introductionmentioning

confidence: 99%

“…For example, the timing in the models ofArgenziano and Schmidt-Dengler (2012, 2013, 2014 corresponds to a firm's timing of entry into a new market. On the other hand, the timing in the models ofReinganum (1918a, b) andFudenberg and Tirole (1985) corresponds to a firm's timing of adopting a new technology.…”

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confidence: 99%

Timing of entry and location/product differentiation

Sun

2018

Int J of Economic Theory

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This research considers two alternative timing games, the precommitment game and the preemption game, where duopoly firms choose their respective timing of market entry and post‐entry profits are generated by price competition in a spatial model à la Hotelling (). We find that the time of first entry is increasing and the time of second entry is decreasing in location differentiation. The results are robust and valid both from an equilibrium analysis and from a welfare analysis. We also note that the difference in equilibrium entry times is too close from the viewpoint of social welfare.

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Inefficient entry order in preemption games

Cited by 18 publications

References 18 publications

Preemption with a second-mover advantage

Preemption with a second-mover advantage

Unobserved heterogeneity in dynamic games: Cannibalization and preemptive entry of hamburger chains in Canada

Timing of entry and location/product differentiation

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