Simultaneous vs. Sequential Price Competition with Incomplete Information
AbstractWe compare the equilibria that result from sequential and simultaneous moves when two firms compete Ã la Bertrand in a homogeneous-good market. and firms’ unit costs are private information. Alternatively, our setup can be interpreted as a procurement auction with endogenous quantity where the buyer uses a first-price format if moves are simultaneous and she awards one bidder a right of first refusal if moves are sequential. We show that the first mover can be more or less aggressive in the sequential than it would be in a simultaneous game. In addition, in the case of sequential choices there is a second-mover advantage. Finally, we prove that, under some conditions, buyer and total surplus are larger when moves are simultaneous.
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Bibliographic InfoPaper provided by Universidad Torcuato Di Tella in its series Department of Economics Working Papers with number 2008_3.
Length: 14 pages
Date of creation: Jan 2008
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Web page: http://www.utdt.edu/ver_contenido.php?id_contenido=439&id_item_menu=568
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oligopoly; auctions with endogenous quantity; right of first refusal; secondmover advantage.;
Other versions of this item:
- Arozamena, Leandro & Weinschelbaum, Federico, 2009. "Simultaneous vs. sequential price competition with incomplete information," Economics Letters, Elsevier, vol. 104(1), pages 23-26, July.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
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