Market uncertainty and competitive equilibrium entry

Abstract

Firms facing an uncertain market environment can choose the optimal mix of early and late production by trading off informational advantages of late production against cost advantages of early production. Consequently, their choice of entry into the market, whether early and/or late, depends on the interplay of cost and stochastic demand conditions. This paper characterizes the competitive equilibrium conditions that determine the mode of market entry and derives comparative statics results to show how competitive equilibrium entry modes vary with changes in various market conditions. © 1991.