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Sequential Entry in a Vertically Differentiated Duopoly

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  • L. Lambertini
  • P. Tedeschi

Abstract

We analyse a model of vertical differentiation focusing on the trade-off between entering early and exploiting monopoly power with a low quality, versus waiting and enjoying a dominant market position with a superior product. We show that there exists a unique equilibrium where the leader enters with a lower quality than the follower, for low discount factors, for high costs of quality and for low consumers willingness to pay for quality.

Suggested Citation

  • L. Lambertini & P. Tedeschi, 2003. "Sequential Entry in a Vertically Differentiated Duopoly," Working Papers 492, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:492
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