CFDP 2126

Entry Games under Private Information


Publication Date: April 2018

Pages: 44


We study market entry decisions when firms have private information about their profitability. We generalize current models by allowing general forms of market competition and heterogeneous firms that self-select when entering the market. Post-entry profits depend on market structure, and on the identities and the private information of the entering firms. We introduce a notion of the firm’s strength and show that an equilibrium where players’ strategies are ranked by strength, or herculean equilibrium, always exists. Moreover, when profits are elastic enough with respect to the firm’s private information, the herculean equilibrium is the unique equilibrium of the game.

Supplemental material

Supplement pages: 4

Keywords: Entry, Oligopolistic markets, Private Information

See CFDP Version(s): CFDP 2126R