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Low-Quality Leadership in a Vertically Differentiated Duopoly with Cournot Competition

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  • L. Lambertini
  • A. Tampieri

Abstract

We model a vertically differentiated duopoly with quantity-setting firms as an extended game in which firms noncooperatively choose the timing of moves at the quality stage, to show that at the subgame perfect equilibrium sequential play obtains, with the low-quality firm taking the leader's role.

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Bibliographic Info

Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number wp750.

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Date of creation: May 2011
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Handle: RePEc:bol:bodewp:wp750

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  1. van Dijk, Theon, 1996. "Patent Height and Competition in Product Improvements," Journal of Industrial Economics, Wiley Blackwell, vol. 44(2), pages 151-67, June.
  2. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
  3. Luca Lambertini & Piero Tedeschi, 2006. "Would you like to enter first with a low-quality good?," Working Papers 20060504, Università degli Studi di Milano-Bicocca, Dipartimento di Statistica.
  4. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  5. Reiko Aoki, 2003. "Effect of credible quality investment with Bertrand and Cournot competition," Economic Theory, Springer, vol. 21(2), pages 653-672, 03.
  6. Hamilton, Jonathan H. & Slutsky, Steven M., 1990. "Endogenous timing in duopoly games: Stackelberg or cournot equilibria," Games and Economic Behavior, Elsevier, vol. 2(1), pages 29-46, March.
  7. L. Lambertini & P. Tedeschi, 2000. "On the Social Desirability of Patents for Sequential Innovations in a Vertically Differentiated Market," Working Papers 376, Dipartimento Scienze Economiche, Universita' di Bologna.
  8. Motta, Massimo, 1993. "Endogenous Quality Choice: Price vs. Quantity Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 113-31, June.
  9. Thomas J. Prusa & Reiko Aoki, 1997. "Sequential vs. Simultaneous Choice With Endogenous Quality," Departmental Working Papers 199510, Rutgers University, Department of Economics.
  10. Aoki, Reiko & Prusa, Thomas J., 1997. "Sequential versus simultaneous choice with endogenous quality," International Journal of Industrial Organization, Elsevier, vol. 15(1), pages 103-121, February.
  11. d'ASPREMONT, C. & GERARD-VARET, L.-A., . "Stackelberg-solvable games and pre-play communication," CORE Discussion Papers RP -425, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. GABSZEWICZ, Jean J. & THISSE, Jacques-François, . "Price competition, quality and income disparities," CORE Discussion Papers RP -370, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  13. Shaked, Avner & Sutton, John, 1982. "Relaxing Price Competition through Product Differentiation," Review of Economic Studies, Wiley Blackwell, vol. 49(1), pages 3-13, January.
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Cited by:
  1. Lambertini, Luca & Tampieri, Alessandro, 2013. "Endogenous timing in quality choices and price competition," Economics Discussion Papers 2013-37, Kiel Institute for the World Economy.
  2. L. Lambertini & A. Tampieri, 2012. "Endogenous Timing in Quality Investments and Price Competition," Working Papers wp815, Dipartimento Scienze Economiche, Universita' di Bologna.

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