Last-In First-Out Oligopoly Dynamics

No 14674, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper extends the static analysis of oligopoly structure into an infinite-horizon setting with sunk costs and demand uncertainty. The observation that exit rates decline with firm age motivates the assumption of last-in first-out dynamics: An entrant expects to produce no longer than any incumbent. This selects an essentially unique Markov-perfect equilibrium. With mild restrictions on the demand shocks, sequences of thresholds describe firms' equilibrium entry and survival decisions. Bresnahan and Reiss's (1993) empirical analysis of oligopolists' entry and exit assumes that such thresholds govern the evolution of the number of competitors. Our analysis provides an infinite-horizon game-theoretic foundation for that structure.

JEL-codes: L13 (search for similar items in EconPapers)
Date: 2009-01
New Economics Papers: this item is included in nep-bec, nep-com, nep-ent, nep-ind and nep-mic
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published as Jaap H. Abbring & Jeffrey R. Campbell, 2010. "Last-In First-Out Oligopoly Dynamics," Econometrica, Econometric Society, vol. 78(5), pages 1491-1527, 09.

Downloads: (external link)
http://www.nber.org/papers/w14674.pdf (application/pdf)

Related works:
Journal Article: Last-In First-Out Oligopoly Dynamics (2010)
Working Paper: Last-In First-Out Oligopoly Dynamics (2009)
Working Paper: Last-in first-out oligopoly dynamics (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:14674

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w14674

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().