STRATEGIC INVESTMENT AND TIMING OF ENTRY

We introduce competition over entry time into a sequential output choice model to show how profit differences will be dissipated. This resolves a problem in the standard Stackelberg model that the order of moves is exogenously specified yet an earlier position in the order is usually preferred to a later one. If capacity costs are not too low, our solution applies even if firms cannot commit to sell their entire output. Introducing positive capacity costs slightly modifies the static Stackelberg results since endogenous cost asymmetries arise. The framework therefore partially rehabilitates the Stackelberg model