Details

Related name

• National Bureau of Economic Research [Browse]
• Campbell, Jeffrey R. [Browse]

Series

• Working Paper Series (National Bureau of Economic Research) no. w14674. [More in this series]
• NBER working paper series no. w14674

Summary note

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, sequences of thresholds describe 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.

Notes

January 2009.

Source of description

Print version record

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