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Endogenous timing and the choice of quality in a vertically differentiated duopoly

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  • L. Lambertini

Abstract

The endogenous choice of timing is discussed in a vertically differentiated duopoly where quality improvement requires a fixed convex cost. The timing decision concerns the quality stage. Using an extended game with observable delay, it is shown that only simultaneous equilibria can arise. This puts into question the ability of Stackelberg games to describe the entry process

Suggested Citation

  • L. Lambertini, 1997. "Endogenous timing and the choice of quality in a vertically differentiated duopoly," Working Papers 294, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:294
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    References listed on IDEAS

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    1. Giulio Ecchia & Luca Lambertini, 1997. "Minimum Quality Standards and Collusion," Journal of Industrial Economics, Wiley Blackwell, vol. 45(1), pages 101-113, March.
    2. 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.
    3. repec:bla:jindec:v:45:y:1997:i:1:p:101-13 is not listed on IDEAS
    4. Crampes, Claude & Hollander, Abraham, 1995. "Duopoly and quality standards," European Economic Review, Elsevier, vol. 39(1), pages 71-82, January.
    5. Shabtai Donnenfeld & Shlomo Weber, 1995. "Limit Qualities and Entry Deterrence," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 113-130, Spring.
    6. Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
    7. Boom, Anette, 1995. "Asymmetric International Minimum Quality Standards and Vertical Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 43(1), pages 101-119, March.
    8. 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.
    9. Jaskold Gabszewicz, J. & Thisse, J. -F., 1980. "Entry (and exit) in a differentiated industry," Journal of Economic Theory, Elsevier, vol. 22(2), pages 327-338, April.
    10. Uri Ronnen, 1991. "Minimum Quality Standards, Fixed Costs, and Competition," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 490-504, Winter.
    11. Rosenkranz, Stephanie, 1997. "Quality improvements and the incentive to leapfrog," International Journal of Industrial Organization, Elsevier, vol. 15(2), pages 243-261, April.
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    Cited by:

    1. Ya‐chin Wang & Leonard F.s. Wang, 2009. "Equivalence Of Competition Mode In A Vertically Differentiated Duopoly With Delegation," South African Journal of Economics, Economic Society of South Africa, vol. 77(4), pages 577-590, December.
    2. Luca Lambertini & Piero Tedeschi, 2007. "On the Social Desirability of Patents for Sequential Innovations in a Vertically Differentiated Market," Journal of Economics, Springer, vol. 90(2), pages 193-214, March.
    3. Cesaltina Pacheco Pires & Sílvia Ferreira Jorge & Margarida Catalão‐Lopes & Joana Pinho & Pedro Garcês & Adriana Alventosa, 2024. "Market configurations when marginal costs are quality‐dependent," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 45(6), pages 3972-3992, September.
    4. Lin Liu & Yuanzhu Lu, 2014. "Endogenous Timing In A Mixed Duopoly With Endogenous Vertical Differentiation," Bulletin of Economic Research, Wiley Blackwell, vol. 66(3), pages 305-312, July.
    5. Alventosa, Adriana & Pacheco Pires, Cesaltina & Ferreira Jorge, Sílvia & Pinho, Joana & Catalão-Lopes, Margarida, 2023. "How does firms’ cost structure affect their quality–price mix? An experimental analysis," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 107(C).
    6. Luciano Fanti, 2017. "An Observable Delay Game with Unionised Managerial Firms," Scottish Journal of Political Economy, Scottish Economic Society, vol. 64(1), pages 50-69, February.
    7. L. Lambertini & P. Tedeschi, 2003. "Sequential Entry in a Vertically Differentiated Duopoly," Working Papers 492, Dipartimento Scienze Economiche, Universita' di Bologna.
    8. Pires, Cesaltina Pacheco & Catalão-Lopes, Margarida & Jorge, Sílvia Ferreira & Garcês, Pedro, 2024. "Quality-price choices and market configurations when location matters," Economic Modelling, Elsevier, vol. 135(C).

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