Speaker :
| Professor Svetlana Boyarchenko (University of Texas, Austin ) |
Title :
|
Preemption games under Levy uncertainty |
Time :
| 2012-03-15 (Thu) 13:45 - 15:15 |
Place : |
社科2教室, Department of Economics, National Taiwan University, No. 21, Hsu-Chow Road, Taipei |
Abstract: |
We study a stochastic version of Fudenberg-Tirole’s preemption game. Two firms
contemplate entering a new market with stochastic demand. Firms differ in sunk
costs of entry. If the demand process has no upward jumps, the low cost firm enters
first, and the high cost firm follows. If leader’s optimization problem has an interior
solution, the leader enters at the optimal threshold of a monopolist; otherwise, the
leader enters earlier than the monopolist. If the demand admits positive jumps,
then the optimal entry threshold of the leader can be lower than the monopolist’s
threshold even if the solution is interior; simultaneous entry can happen either as an
equilibrium or a coordination failure; the high cost firm can become the leader. We
characterize subgame perfect equilibrium strategies in terms of stopping times and
value functions. Analytical expressions for the value functions and thresholds that
define stopping times are derived. |