TY  - JOUR
AU  - Abbring,Jaap H.
AU  - Campbell,Jeffrey R.
TI  - Last-In First-Out Oligopoly Dynamics
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14674
PY  - 2009
Y2  - January 2009
UR  - http://www.nber.org/papers/w14674
L1  - http://www.nber.org/papers/w14674.pdf
N1  - Author contact info:
Jaap H. Abbring
CentER, Department of Econometrics & OR
Tilburg University
P.O. Box 90153
5000 LE Tilburg, The Netherlands
E-Mail: J.H.Abbring@uvt.nl

Jeffrey R. Campbell
Senior Economist
Economic Research Department
Federal Reserve Bank of Chicago
230 South LaSalle Street
Chicago, IL 60604-1413
Tel: 312/322-6156
Fax: 312/322-2357
E-Mail: jcampbell@frbchi.org
AB  - This paper extends the static analysis of oligopoly structure into an infinite-horizon setting with sunk costs and demand uncertainty. The observation that exit rates decline with firm age motivates the assumption of last-in first-out dynamics: An entrant expects to produce no longer than any incumbent. This selects an essentially unique Markov-perfect equilibrium. With mild restrictions on the demand shocks, sequences of thresholds describe firms' equilibrium entry and survival decisions. Bresnahan and Reiss's (1993) empirical analysis of oligopolists' entry and exit assumes that such thresholds govern the evolution of the number of competitors. Our analysis provides an infinite-horizon game-theoretic foundation for that structure.
ER  -