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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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    1. 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.
    2. 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.
    3. Crampes, Claude & Hollander, Abraham, 1995. "Duopoly and quality standards," European Economic Review, Elsevier, vol. 39(1), pages 71-82, January.
    4. 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.
    5. Uri Ronnen, 1991. "Minimum Quality Standards, Fixed Costs, and Competition," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 490-504, Winter.
    6. Boom, Anette, 1995. "Asymmetric International Minimum Quality Standards and Vertical Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 43(1), pages 101-119, March.
    7. Shabtai Donnenfeld & Shlomo Weber, 1995. "Limit Qualities and Entry Deterrence," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 113-130, Spring.
    8. Rosenkranz, Stephanie, 1997. "Quality improvements and the incentive to leapfrog," International Journal of Industrial Organization, Elsevier, vol. 15(2), pages 243-261, April.
    9. 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.
    10. Ecchia, Giulio & Lambertini, Luca, 1997. "Minimum Quality Standards and Collusion," Journal of Industrial Economics, Wiley Blackwell, vol. 45(1), pages 101-113, March.
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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. 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.
    4. 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.
    5. L. Lambertini & P. Tedeschi, 2003. "Sequential Entry in a Vertically Differentiated Duopoly," Working Papers 492, Dipartimento Scienze Economiche, Universita' di Bologna.

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