TITLE:
Value of Waiting and Excess Entry Theorem
AUTHORS:
Yasunori Fujita
KEYWORDS:
Excess Entry Theorem, Cournot Competition, Optimal Stopping Theory, Geometric Brownian Motion, Value of Waiting
JOURNAL NAME:
Theoretical Economics Letters,
Vol.6 No.2,
April
22,
2016
ABSTRACT: By reformulating the Cournot model by making use of the optimal stopping
theory, we reconsider the excess entry theorem for a stochastic market. It is
revealed that: 1) free entry in a stochastic oligopolistic market is socially
excessive, owing not only to the presence of scale economies but also to the
value of waiting; 2) welfare maximizing number of the entrants is larger if the
market is more uncertain.