Publication Date: April 2018
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.
Supplement pages: 4
Keywords: Entry, Oligopolistic markets, Private InformationSee CFDP Version(s): CFDP 2126R