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Preemption with a second-mover advantage

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  • Smirnov, Vladimir
  • Wait, Andrew

Abstract

We examine a timing game with complete information and observable actions when there is a second-mover advantage. Allowing for heterogenous payoffs between players and for both leader and follower payoff functions to be multi-peaked and non-monotonic, we develop a new solution method to characterize the pure-strategy equilibria. Sometimes these resemble familiar second-mover advantage equilibria from the literature. However, we show, despite a follower advantage at all times for both players, that there can be a preemption equilibrium. Our generic solution method can be applied to a range of applications, such as market entry, innovation and holdout games for rival sellers of complementary assets.

Suggested Citation

  • Smirnov, Vladimir & Wait, Andrew, 2021. "Preemption with a second-mover advantage," Games and Economic Behavior, Elsevier, vol. 129(C), pages 294-309.
    • Handle: RePEc:eee:gamebe:v:129:y:2021:i:c:p:294-309
    DOI: 10.1016/j.geb.2021.06.003
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    Cited by:

    1. Steg, Jan-Henrik, 2022. "On identifying subgame-perfect equilibrium outcomes for timing games," Games and Economic Behavior, Elsevier, vol. 135(C), pages 74-78.

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    More about this item

    Keywords

    Timing games; Second-mover advantage; Preemption;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • 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
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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