Imperfect Competition, Integer Constraints and Industry Dynamics
CORE Discussion Paper No. 2004/42
15 Pages Posted: 25 Oct 2006
Date Written: June 2004
Amir and Lambson (2003) developed an infinite-horizon, stochastic model of entry and exit by integer numbers of firms facing sunk costs and uncertain market conditions. Here, as examples of the model's usefulness, special cases are applied to the following three issues: (1) the relationship between sunk costs and industry concentration, (2) entry when current profits are negative, and (3) the relationship between entry and the length of the product cycle.
Keywords: entry and exit, dynamic games, integer constraints
JEL Classification: C73, D43, L13
Suggested Citation: Suggested Citation