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Time‐to‐market in vertically differentiated industries

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  • Emanuele Bacchiega
  • Jean J. Gabszewicz
  • Ornella Tarola

Abstract

This paper analyzes the optimal time to introduce a new product in a vertical differentiated market when the delay between innovation and market opening can be shortened through investments whose costs increase, the shorter the desired delay. The timing process is affected by the trade‐off between being first and getting monopoly profits, and postponing entry for reducing time‐to‐market costs. We study the balance of these forces and how this balance is influenced by market structure. In our model, it is possible a priori to observe at the optimal solution both a quality‐upgrading equilibrium (first entering the market with the low quality good and then marketing the high quality variant) and quality‐downgrading equilibrium (first entering the market with the high quality good and then marketing the low quality variant) while in the existing published literature a quality‐upgrading equilibrium is always observed.

Suggested Citation

  • Emanuele Bacchiega & Jean J. Gabszewicz & Ornella Tarola, 2007. "Time‐to‐market in vertically differentiated industries," International Journal of Economic Theory, The International Society for Economic Theory, vol. 3(4), pages 279-295, December.
    • Handle: RePEc:bla:ijethy:v:3:y:2007:i:4:p:279-295
    DOI: 10.1111/j.1742-7363.2007.00060.x
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    References listed on IDEAS

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    Cited by:

    1. Tai‐Liang Chen & Zuyi Huang, 2020. "Technology licensing or cost‐reducing outsourcing? Game theoretical analysis on consumers' home bias effects and firms' optimal strategies," Bulletin of Economic Research, Wiley Blackwell, vol. 72(4), pages 417-433, October.
    2. Jean Gabszewicz & Ornella Tarola, 2012. "Product innovation and firms’ ownership," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 21(4), pages 323-343, April.
    3. Makoto Yano, 2009. "The Foundation Of Market Quality Economics," The Japanese Economic Review, Japanese Economic Association, vol. 60(1), pages 1-32, March.
    4. Takashi Komatsubara, 2008. "Equilibrium Selection In The Yano Model Of Price Leadership," Pacific Economic Review, Wiley Blackwell, vol. 13(5), pages 649-655, December.

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    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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