Demand uncertainty, product differentiation, and entry timing under spatial competition

Arbeitspapier

We investigate the entry timing and location decisions under market-size uncertainty with Brownian motions in a continuous-time spatial competition duopoly model a la d'Aspremont et al. (1979). Under a sequential equilibrium, the threshold of the follower non-monotonically increases in volatility, which is in stark contrast to the extant results in the real options literature. Also, although the follower's entry timing tends to be late as the volatility becomes amplified, the leader is more likely to increase the degree of product differentiation as the volatility gets higher. Finally, we compare the equilibrium entry decisions with the second-best ones.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ISER Discussion Paper ; No. 1007

Classification and Topics

• Classification: Wirtschaft ; Stochastic and Dynamic Games; Evolutionary Games; Repeated Games ; Criteria for Decision-Making under Risk and Uncertainty ; Production, Pricing, and Market Structure; Size Distribution of Firms ; Oligopoly and Other Imperfect Markets
• Subject: Location ; Hotelling model ; Continuous-time model ; Entry timing ; Real options

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Ebina, Takeshi ; Matsushima, Noriaki ; Nishide, Katsumasa
• Event: Veröffentlichung
• (who): Osaka University, Institute of Social and Economic Research (ISER)
• (where): Osaka
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/197736
• Last update: 10.03.2025, 11:45 AM CET