MONOPOLY MARKET

Abstract

In this study, game-theoretic models of entry are used to create new empirical models of market concentration. To explore the consequences of entry in isolated monopolistic markets for new cars, we build our models from inequality conditions that explain entrants' equilibrium tactics in simultaneous-move and sequential-move games. We conclude that monopolistic dealers do not prevent the establishment of a second dealer based on estimations of the market size required to support one or two dealers. Additionally, we discover that entrance does not significantly reduce price-cost margins. In this study, game-theoretic models of entry are used to create new empirical models of market concentration. To explore the consequences of entry in isolated monopolistic markets for new cars, we build our models from inequality conditions that explain entrants' equilibrium tactics in simultaneous-move and sequential-move games. We conclude that monopolistic dealers do not prevent the establishment of a second dealer based on estimations of the market size required to support one or two dealers. Additionally, we discover that entrance does not significantly reduce price-cost margins.