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| Author: | Maggi, G. |
| Title: | Endogenous leadership in a new market |
| Journal: | RAND Journal of Economics
1996 : WINTER, VOL. 27:4, p. 641-659 |
| Index terms: | LEADERSHIP MARKETS COMPANIES INVESTMENTS |
| Language: | eng |
| Abstract: | This paper analyses strategic investment under uncertainty in a new market where firms face a tradeoff between flexibility and commitment. Even though firms are ex ante identical and have symmetric opportunities to enter the market, the model predicts asymmetric equilibria under general conditions. In equilibrium one firm may commit to early investment and the other firm follows a wait-and-see strategy. Firms end up in the ex post outcome with asymmetric sizes if the market profitability turns out close to or lower than expected, firms end up in symmetric position if the market turns out profitable. When uncertainty is small the model yields Stackelberg outcomes. |
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