Entry and exit with information externalities

In the paper we analyze how the possibility of revealing information to a competitor alters the entry/investment behavior of a first entrant. We show that after entering the market, the firm might refrain from making further profitable investments in order to hide information from the competitor. Moreover, we show that before entering, the firm anticipates a strategic advantage in choosing an initially small scale of entry: in this way it “commits” itself to revealing the true state of the market with its subsequent decisions and this fact is beneficial since it induces the competitor to postpone entry into market.