Competition, Innovation, and Antitrust. A Theory of Market ... - Intertic

Preface
In 1934 Springer published a book by Heinrich von Stackelberg, “Market and
Equilibrium”, which contained pathbreaking studies on oligopolistic markets.
In particular, it analyzed the behavior of a firm acting as a leader with a first
mover advantage in the choice of its production level over another firm acting
as a follower. That analysis became the foundation of the economic theory of
market leaders and is the starting point of my book. In the following pages
I develop a generalization of Stackelberg’s idea, with a focus on the understanding
of the behavior of market leaders under different entry conditions,
particularly when entry in the market is endogenous. Rather than limiting
the analysis to the effects of the market structure on the behavior of the
market leaders, I also study the effects of the behavior of market leaders on
the market structure.
In other words, this book can be seen as an attempt to describe endogenous
market structures where the strategies, the expectations on the
strategies of the others, and also the entry decisions are the fruit of rational
behavior. In the last few decades, economic theory has put a lot of emphasis
on the rational behavior in the choice of actions and strategies and on the
rational expectations on these choices. Most fields of economic theory have
embraced both these elements adopting the rational expectations approach
in models with perfect competition first and imperfect competition later.
The theory of industrial organization has embraced these elements with the
adoption of game theory as the standard tool of analysis of the interactions
between firms. Meanwhile, economists have often neglected the rational behavior
of the firms in their entry decisions, both in partial equilibrium and
general equilibrium models. For this reason, microeconomic and macroeconomic
analyses of markets with imperfect competition have been often limited
to situations in which the number of firms was exogenously given. The main
scope of this book is to provide a general microeconomic analysis of markets
where entry decisions are rational decisions, and to understand the effects of
endogenous entry on the equilibrium behavior of the firms and on the welfare
properties of the equilibrium market structure.
A great deal of this work is inspired by and based on the revolutionary
contributions of game theoretic analysis to industrial economics and antitrust
policy in the last three decades. The pathbreaking works of Avinash Dixit,