Imperfect competition, integer constraints and industry dynamics

Amir and Lambson (Amir, R. and V. E. Lambson (2003), Entry, Exit, and Imperfect Competition in the Long Run, Journal of Economic Theory, 110, 191-203) developed a general infinite-horizon, stochastic model of endogenous entry and exit by integer numbers of firms facing sunk costs and uncertain market conditions. Here a more tractable special case is presented to show how the model can provide a unifying framework for issues that arise in dynamic oligopolies. Examples of these issues include: (1) the relationship between sunk costs and industry concentration, (2) entry when current profits are negative, and (3) the relationship between entry and the length of the product cycle.