Entry Games under Private Information

Authors

José-Antonio Espín-Sánchez
Álvaro Parra

Document Type

Discussion Paper

Publication Date

4-1-2018

CFDP Number

2126

CFDP Pages

44

Abstract

We study market entry decisions when firms have private information about their profitability. We generalize current models by allowing general forms of market competition and heterogeneous firms that self-select when entering the market. Post-entry profits depend on market structure, and on the identities and the private information of the entering firms. We introduce a notion of the firm's strength and show that an equilibrium where players' strategies are ranked by strength, or herculean equilibrium, always exists. Moreover, when profits are elastic enough with respect to the firm's private information, the herculean equilibrium is the unique equilibrium of the game.

Comments

Supplement Materials, 4 pp

Recommended Citation

Espín-Sánchez, José-Antonio and Parra, Álvaro, "Entry Games under Private Information" (2018). Cowles Foundation Discussion Papers. 149.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/149