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Endogenous timing of actions under conflict between two types of second mover advantage

  • Yoon, Young-Ro

In this model, two players, who are heterogeneous in information quality, compete with each other with perfect information about the other player's information quality. The less-informed player has an incentive to delay her action in order to gain more information. The more-informed player also intends to delay her action, not through a desire to learn but rather to prevent the less-informed player from gaining information. Hence, if a waiting option is available, both players want to delay their actions and the conflict between the two types of second mover advantage yields a delay race. Although both players can benefit from a delay, the gain from a delay in order to learn is greater than that from a delay intended to prevent the other from learning. Therefore, the cost for a delay plays an important role in characterizing the equilibrium, and if the sequential timing of actions is derived in a pure equilibrium, the leader will be the more-informed player. If a given cost for a delay is sufficiently low, the only equilibrium is a mixed equilibrium. Interestingly, in that equilibrium, the existence of the first-mover advantage from being imitated is also derived.

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Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 27 (2009)
Issue (Month): 6 (November)
Pages: 728-738

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Handle: RePEc:eee:indorg:v:27:y:2009:i:6:p:728-738
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505551

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