Would you like to enter first with a low-quality good?
Using a two-period duopoly model with vertical differentiation, we show that there exists a unique subgame perfect equilibrium where the first entrant supplies a lower quality and gains higher profits than the second entrant. We also prove that this entry sequence is also socially efficient.
|Date of creation:||2003|
|Date of revision:|
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"Location Models of Horizontal Differentiation: A Special Case of Vertical Differentiation Models,"
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1997021, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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- Heidrun C. Hoppe & Ulrich Lehmann-Grube, 2001. "Second-Mover Advantages in Dynamic Quality Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(3), pages 419-433, 09.
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