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 socially efficient.
(This abstract was borrowed from another version of this item.)
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- A. Michael Spence, 1975. "Monopoly, Quality, and Regulation," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 417-429, Autumn.
- 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.
- 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.
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- Ulrich Lehmann-Grube, 1997. "Strategic Choice of Quality When Quality is Costly: The Persistence of the High-Quality Advantage," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 372-384, Summer.
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4473, National Bureau of Economic Research, Inc.
- Dutta, Prajit K & Lach, Saul & Rustichini, Aldo, 1995. "Better Late Than Early: Vertical Differentiation in the Adoption of a New Technology," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(4), pages 563-89, Winter.
- Lambertini, Luca, 1996.
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- Luca Lambertini, 1994. "Choosing Roles in a Duopoly for Endogenously Differentiated Products," Working Papers 191, Dipartimento Scienze Economiche, Universita' di Bologna.
- Lambertini, Luca, 1997. "Unicity of the equilibrium in the unconstrained Hotelling model," Regional Science and Urban Economics, Elsevier, vol. 27(6), pages 785-798, November.
- Luca LAMBERTINI, 1997.
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1997021, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Luca Lambertini, 1995. "The Multiproduct Monopolist Under Vertical Differentiations: an Inductive Approach," Working Papers 226, Dipartimento Scienze Economiche, Universita' di Bologna.
- Donnenfeld, Shabtai & Weber, Shlomo, 1992. "Vertical product differentiation with entry," International Journal of Industrial Organization, Elsevier, vol. 10(3), pages 449-472, September.
- Shaked, Avner & Sutton, John, 1982. "Relaxing Price Competition through Product Differentiation," Review of Economic Studies, Wiley Blackwell, vol. 49(1), pages 3-13, January.
- 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.
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
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