The Econometric SocietyEdited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262
August 15, 2022
Econometrica: Mar, 2018, Volume 86, Issue 2
https://doi.org/10.3982/ECTA14060
p. 721-735
Jaap H. Abbring, Jeffrey R. Campbell, Jan Tilly, Nan Yang
This paper develops a simple model of firm entry, competition, and exit in oligopolistic markets. It features toughness of competition, sunk entry costs, and market‐level demand and cost shocks, but assumes that firms' expected payoffs are identical when entry and survival decisions are made. We prove that this model has an essentially unique symmetric Markov‐perfect equilibrium, and we provide an algorithm for its computation. Because this algorithm only requires finding the fixed points of a finite sequence of contraction mappings, it is guaranteed to converge quickly.
This zip file contains the replication files for the manuscript.
This supplement to Abbring, Campbell, Tilly, and Yang (2017b) (hereafter referred to as the "main text") (i) proves a theorem we rely upon for the characterization of equilibria and (ii) develops results for an alternative specification of the model.
