We consider the interaction between an incumbent firm and a potential entrant, and examine how this interaction is affected by demand fluctuations. Our model gives rise to procyclical entry, prices, and price-cost margins, although the average price in the market can be countercyclical if the...

We consider the interaction between an incumbent firm and a potential entrant, and examine how this interaction is affected by demand fluctuations. Our model gives rise to procyclical entry, prices, and price-cost margins, although the average price in the market can be countercyclical if the...

We analyze firms' entry, production and hedging decisions under imperfect competition. We consider an oligopoly industry producing a homogeneous output in which risk-averse firms face an entry cost upon entering the industry, and then compete in Cournot with one another. Each firm faces...

This document is the online appendix for "Entry, Imperfect Competition, and Futures Market for the Input." The paper to which these Appendices apply is available at the following URL:"http://ssrn.com/abstract=2025996" http://ssrn.com/abstract=2025996

Where markets are insufficiently competitive, governments can intervene by auctioning licenses to operate or by forcing divestitures. The Dutch government has done exactly that, organizing auctions to redistribute tenancy rights for high-way gasoline stations and forcing the divestiture of...

I analyze two opposing effects of firm dynamics on productivity over the business cycle. Consider net exit, on the one hand it reallocates resources to incumbents whose productivity improves through scale economies, on the other hand it reduces the competitive pressure incumbents face which...

I develop a model of dynamic firm entry, oligopolistic competition and returns to scale in order to decompose TFP fluctuations into technical change, economic profit and markup fluctuations. I show that economic profits cause short-run upward bias in measured TFP, but this subsides to upward...

An infinite-horizon, stochastic model of entry and exit with sunk costs and imperfect competition is constructed. Simple examples provide insights into: (1) the relationship between sunk costs and industry concentration, (2) entry when current profits are negative, and (3) the relationship...

Amir and Lambson (2003) developed an infinite-horizon, stochastic model of entry and exit by integer numbers of firms facing sunk costs and uncertain market conditions. Here, as examples of the model's usefulness, special cases are applied to the following three issues: (1) the relationship...

The literature on strategic growth options examines the impact of investment to gain comparative advantages. The commitment of irreversible investment may confer strategic advantages as a result of a reduction in future expansion costs (Dixit, 1980) or operating costs (Kulatilaka and Perotti,...