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Journal Articles Theory and Decision Year : 2008

How Risk Disciplines Pre-commitment

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Christophe Caron
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Abstract

This paper studies the entry strategies of firms on risky markets. We focus on markets where demand is affine and cost is linear, moreover, the demand includes a normally distributed random variable. In such a model, we show that the leader's strategy changes with the level of market risk even when firms are risk neutral. Therefore, the availability of future information for a Stackelberg follower has a feedback effect on the leader's strategy. We also show that compared with traditional markets with no risk, the basic trade-off between flexibility and pre-commitment is only slightly changed in the qualitative game where firms are free to choose when to enter the market.
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Dates and versions

hal-00825882 , version 1 (24-05-2013)

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  • HAL Id : hal-00825882 , version 1

Cite

Christophe Caron, Thierry Lafay. How Risk Disciplines Pre-commitment. Theory and Decision, 2008, 65 (3), pp.205-226. ⟨hal-00825882⟩

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