We study equilibria in static entry games with single-dimensional private information. Our framework embeds many models commonly used in applied work, allowing for firm heterogeneity and selective entry. We introduce the notion of strength, which summarizes a firm's ability to endure competition. In environments of applied interest, an equilibrium in which entry strategies are ordered according to the firms' strengths always exists. We call this equilibrium herculean. We derive simple and testable sufficient conditions guaranteeing equilibrium uniqueness and, consequently, a unique counterfactual prediction.
We study equilibria in static entry games with single-dimensional private information. Our framework embeds many models commonly used in applied work, allowing for firm heterogeneity and selective entry. We introduce the notion of strength, which summarizes a firm's ability to endure competition. In environments of applied interest, an equilibrium in which entry strategies are ordered according to the firms' strengths always exists. We call this equilibrium herculean. We derive simple and testable sufficient conditions guaranteeing equilibrium uniqueness and, consequently, a unique counterfactual prediction.
We study market entry decisions when firms have private information about their profitability. We generalize current models by allowing general forms of market competition and heterogeneous firms that self-select when entering the market. Post-entry profits depend on market structure, and on the identities and the private information of the entering firms. We introduce a notion of the firm’s strength and show that an equilibrium where players’ strategies are ranked by strength, or herculean equilibrium, always exists. Moreover, when profits are elastic enough with respect to the firm’s private information, the herculean equilibrium is the unique equilibrium of the game.
We study equilibrium uniqueness in entry games with private information. Our framework embeds models commonly used in applied work, allowing rich forms of firm heterogeneity and selective entry. We introduce the notion of strength, which summarizes a firm’s ability to endure competition. In environments of applied interest, an equilibrium in which entry strategies are ranked according to strength, called herculean equilibrium, always exists. Thus, when the entry game has a unique equilibrium, it must be herculean. We derive simple sufficient conditions guaranteeing equilibrium uniqueness and, consequently, robust counterfactual analyses.