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- Title
The timing and location of entry in growing markets: subgame perfection at work.
- Authors
Bollinger, Bryan; Doraszelski, Ulrich; Judd, Kenneth L.; McDevitt, Ryan C.
- Abstract
We develop and analyze a dynamic model in which firms decide when and where to enter a growing market. We do not pre‐specify the order of entry, allowing instead for the leader and follower to be determined endogenously. We characterize the subgame perfect equilibria of the dynamic game and show the times and locations of entry are governed by the threat of preemption, which leads to premature entry, less extreme locations, and the dissipation of rents. Using data on gas stations, restaurants, and hotels in isolated markets, we find results consistent with subgame perfection for gas stations and three‐star hotels.
- Subjects
MARKET entry; HOTEL marketing; PERFECTION; SERVICE stations; TELEVISION game programs
- Publication
RAND Journal of Economics (Wiley-Blackwell), 2024, Vol 55, Issue 2, p169
- ISSN
0741-6261
- Publication type
Article
- DOI
10.1111/1756-2171.12462