Decisions, Operations, and Technology Management

An emerging market or market segment provides firms both the opportunity to enter early and capture market share and also the risk that the market will turn out to be less fruitful than expected. We formulate and analyze a game-theoretic model in which multiple firms with uncertain and/or disparate beliefs about the eventual market size decide whether to enter such a market. For increasingly general models, we show that the structure (i.e. the number and identity of participating firms) and profitability of equilibrium oligopolies can be determined by a classification schemes based on the firms' beliefs about the viable level of market concentration. This scheme is adapted to random forecasts (i.e. forecasts expressed as probability distributions) as well as point forecasts. This study was motivated by managerial issues encountered by a client firm engaged in semiconductor design.