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Entry and market selection of firms: a laboratory study

[journal article]

Brandts, Jordi; Giritligil, Ayça Ebru

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Please use the following Persistent Identifier (PID) to cite this document:http://nbn-resolving.de/urn:nbn:de:0168-ssoar-277422

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Abstract We study how markets adjust to the entry of new firms under different conditions. Two incumbents face entry by three other firms. When firms' costs are equal, entry always leads consumer surplus and profits to their equilibrium levels. When entrants are more efficient than incumbents, entry leads consumer surplus to equilibrium. With cost asymmetries, market behavior is satisfactory from the consumers’ standpoint but does not yield adequate signals to other potential entrants. Simultaneous entry is in the short run more favorable to consumers than sequential entry. A longer incumbency phase favors consumers after entry.
Classification Political Economy; Management Science
Free Keywords Market selection; Imperfect competititon; Entry; Experiments; C09; C72; D43; D83; L13
Document language English
Publication Year 2008
Page/Pages p. 593-612
Journal Journal of Economic Behavior & Organization, 68 (2008) 3-4
DOI http://dx.doi.org/10.1016/j.jebo.2008.06.012
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)