Market Niche, Flexibility and Commitment

Suren Basov, La Trobe University
Vladimir Smirnov, University of Sydney
Andrew Wait, University of Sydney

Abstract

We study a market-entry game in which the potential entrants coordinate their actions (i.e. enter different market segments rather than compete directly). If (i) the firms have an option to wait, and (ii) each firm has a different reaction time after they had decided to wait, the unique outcome that survives the iterated elimination of weakly dominated strategies favors the less flexible firm.