Entrepreneurial First Movers, Brand-Name Fast Seconds, and the Evolution of Market Structure

We analyze the interaction between entrepreneurs who open new markets and established, `fast second' firms to develop them. We use a spatially differentiated model in which early entry is traditionally excessive. However, the anticipated later entry by the `fast second' brand can potentially reverse this result. We show that conditions that make for the most initial competitive market are precisely those that result in the least optimal amount of initial entry and in which entrepreneurial entry is typically well below the efficient level. We also show that asymmetric oligopoly is a natural market equilibrium.