Theory of Market Entry: Dynamic Games

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School of Business | Bachelor's thesis
Date
2017
Major/Subject
Mcode
Degree programme
Taloustiede
Language
en
Pages
26
Series
Abstract
In this thesis I study the theory of market entry through dynamic games. I answer how economics describes market entry and how parties act in order to maximize their profits. I present the concepts of Nash equilibrium and subgame perfect Nash equilibrium in dynamic games. When studying market entry I first present models of sequential quantity competition using Stackelberg's model and the Spence-Dixit model. Second, I present sequential price competition with identical firms and with differentiated products. Third, I present sequential quality choice. In sequential price competition and in sequential quality choice I use variants of Hotelling's spacial model in my analysis. The models I study here are highly mathematical and abstract. Though these models do not provide a perfect answer in real life scenarios, they offer a guideline on firms' decision-making process in market entry.
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Thesis advisor
Murto, Pauli
Keywords
market entry, dynamic games, sequential games, game theory
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