Entry and exit with information externalities Comino, Stefano

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Comino, Stefano
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Journal of Economic Behavior & Organization
Competition (Economics) -- Research; First-mover advantage -- Research; Economics
To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jebo.2004.07.003 Byline: Stefano Comino Keywords: Entry; Information externalities; Wait and see; First entrant; Strategic behavior Abstract: In the paper we analyze how the possibility of revealing information to a competitor alters the entry/investment behavior of a first entrant. We show that after entering the market, the firm might refrain from making further profitable investments in order to hide information from the competitor. Moreover, we show that before entering, the firm anticipates a strategic advantage in choosing an initially small scale of entry: in this way it "commits" itself to revealing the true state of the market with its subsequent decisions and this fact is beneficial since it induces the competitor to postpone entry into market. Author Affiliation: Dipartimento di Economia, Universita degli Studi di Trento, Via Inama 5, 38100 Trento, Italy Article History: Received 21 February 2004; Revised 27 July 2004; Accepted 27 July 2004 Article Note: (footnote) [star] Paper presented at the First IIO Conference (Boston) and at the workshops at Dipartimento di Scienze Economiche - Universita di Padova, Dipartimento di Economia - Universita di Trento and DIW - Berlin. The author wishes to thank Bruno Cassiman, Ines Macho Stadler, Fabio Manenti, Antonio NicolA[sup.2], David Perez-Castrillo, Pierre Regibeau, Ecer Sencer, Konrad Stahl, and Zhang Zhentang for useful comments. Three anonymous referees and the co-editor of the Journal Claude Menard are also acknowledged. The usual disclaimer applies.
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