Endogenous timing in a mixed oligopoly under demand uncertainty

Abstract

This paper analyzes a Hotelling-type game in a mixed oligopoly, where firms can either enter the market in period 1, facing demand uncertainty, or postpone their entry, in order to acquire complete information. It is shown that, for a high (low) level of uncertainty, there is a pure (mixed)-strategy equilibrium. Moreover, the standard result in the literature—that uncertainty is a differentiation force, is only possible when the degree of uncertainty is small. An increase in the degree of uncertainty could force firms to delay their entry and lead to a socially optimal outcome.