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Second-mover advantage and price leadership in Bertrand duopoly

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  • AMIR, Rabah
  • STEPANOVA, Anna

Abstract

We consider the issue of first versus second-mover advantage in differentiated-product Bertrand duopoly with general demand and asymmetric linear costs. We generalize existing results for all possible combinations where prices are either strategic substitutes and/or complements, dispensing with common extraneous assumptions. We show that a firmwith a sufficiently large cost lead over its rival has a first mover advantage. For the linear version of the model, we invoke a naturalendogenous timing scheme coupled with equilibrium selection according to risk-dominance. This yields sequential play with the low-cost firm as leader as the unique equilibrium outcome.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2004037.

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Date of creation: 00 Jun 2004
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Handle: RePEc:cor:louvco:2004037

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Keywords: price competition; endogenous timing; first/second-mover advantage; risk dominance;

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